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INTRODUCTION
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HISTORY OF ATLAS CYCLE:-
A man had a dream – to provide quality bicycles to his countrymen at reasonable prices.
The man was Late Janki Das Kapur.
Atlas Cycles started its odyssey way back in 1951 and today it is one of the largest
manufacturers of bicycles in the world. Atlas bicycles are ridden over 50 countries around
the globe. Now, Atlas Cycles (Sonepat) has also bagged ISO 9001: 2000 certificate by
implementing the latest International Quality Management System. And they owe all this
success to their devoted workers, engineers and their numerous satisfied customers
worldwide. A man had a dream. To provide quality bicycles to his countrymen at reasonable
prices. The man was Late Shri Janki Das Kapur. The dream: Atlas Cycle Industries Ltd.
A modest beginning in an improvised shed at Sonepat. This was transformed into a 25 acre
factory complex in a record period of 12 months.
In the very first year of operation 12000 Atlas Cycles rolled out of the plant. Soon, the first
consignment of Atlas Cycles was sent overseas. Atlas has since then exported to over 35
countries.
By 1965, Atlas had emerged as India's largest cycle manufacturer. Greater demand, higher
production and ever-expanding markets made Atlas a name to reckon with.
Company has three well- integrated Bicycle plants to meet the rising domestic and
international demands as well as five ancillary units for manufacturing components. It has
manufacturing facilities at Sonapet, Rasoi, Sahibabad and Gurgaon near Delhi. To meet its
entire steel tube requirements the Atlas Steel Tube mill was set up at Gurgaon. Atlas cycles
as well as components are exported to over 35 countries among them are advance countries
like Italy, Holland, U.K., Japan and Australia.
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It was time for accolades. ATLAS was presented with the FICCI Award for 'Best Industrial
Relations'. ATLAS' growing importance in the international arena did not go unnoticed
either. Italy's Gold Mercury International Award was conferred on ATLAS. Subsequently,
ATLAS also received the prestigious EEPC Award for export excellence for the year 198O -
81 and several times later on. The honor of being appointed official supplier of bicycles to
the IXth Asiad, at Delhi, added another feather to ATLAS' cap. With growing demand for its
products came the need for achieving self-sufficiency in specialized bicycle components.
To meet its entire steel tube requirements the ATLAS Steel Tube mill was set up at Gurgaon.
Not only was dependence on external suppliers broken but stringent quality controls,
synonymous with ATLAS, could be maintained.
To meet the entire requirement for steel tubes, ATLAS Steel Tube Industries was set up as a
subsidiary unit in Gurgaon in 1983. This division was recently shifted to Bawal, District
Rewari in 2006 for expansion purpose and re-setup on a sprawling 10 acre land. This unit
built with Japanese collaboration is equipped with the latest machinery for mass production.
ATLAS has achieved self- sufficiency even in the production of chains, chain wheels, hubs
and more.
New expansions. New entrants. At ATLAS this is a process that never seems to stop. An
ATLAS cycle to suit every individual taste and requirement. The promise of ATLAS. The
dream of one man fifty years ago. The dream continues. To clock new records, new
innovations, new venture.
The Company's objects are to manufacture bicycles and bicycle components and parts.
Some of the trade names used by the company are `ATLAS', `ARMY', `EASTERN STAR'
and `ZEBRA'. The factory is located at Sonepat, near Delhi, and the factory buildings cover
an area of about 2, 50,000 sq. ft.
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- The capital structure in 1956. 3,144 pref. shares fully paid- up 160 pref. Shares 90%
paid-up 255 pref. shares 50% paid-up.
1969 - The Company sponsored a scheme for the manufacture of powered bicycles in
technical collaboration with S.A.C.E.M. of France, one of the largest manufacturers of
powered bicycles under the trade name `Velosolex'.
1970 - A new company under the name and style of Atlas Auto-Cycles Ltd., was registered
as a subsidiary of the company for this purpose on 9th March. This company was to
manufacture 50,000 powered bicycles per annum. The company obtained Governments
approval for investing Rs.10 lakhs in the equity capital of Atlas Auto-Cycles Ltd.
1971 - The Collaboration agreement for the manufacture of powered b icycles was
unilaterally terminated by the foreign collaborator on technical grounds.
1972 - In January, the factory entered into a technical collaboration agreement with an
Iranian party who proposed to manufacture bicycles and bicycle parts. The company was to
supply technical know- how etc. in consideration of some technical fees payable by the
Iranian party.
- The Company also entered into another 10 year collaboration agreement with the National
Development Corporation of Tanzania for the manufacture of bicycles in that country. This
agreement was transferred to The National Bicycles Co., Ltd. Tanzania.
1979 - Punjab and Haryana High Court approved the amalgamation of this subsidiary with
the company with effect from 1st January.
- Authorised capital reclassified. 7,579 - 11% pref. and 1,29,337 No. of equity shares
allotted to members of Atlas Auto-Cycles, Ltd. without payment in cash upon its merge with
the company.
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1985 - The Company went ahead with its tube mill project at Gurgaon (Haryana). A factory
with a production capacity of 10,000 TPA of tubes was under construction.
1986 - Land and buildings of the company were revalued as on 30th June, and the net surplus
of Rs 789.06 lakhs arising out of this was credited to capital reserve.
1990 - 6,856 - 11% pref. shares were redeemed as on 31st March, 1991.
1991 - 723 - 11% pref. shares redeemed. 4, 71,250 No. of equity shares issued on part
conversion of pref.
1992 - The company issued 494550 - 15% PCD of Rs.200 each on Rights basis. Of these
Rs.130 of the face value of each debenture was converted into one equity share of Rs.10
each at a prem. of Rs.120 per share. Accordingly 471250 shares allotted.
- Balance Rs.70 of the face value of each debenture was to BE REDEEMED at par in three
instalments of Rs.25, Rs.25 and Rs.20. at the end of 7th, 8th and 9th year respectively from
the date of allotment of debenture ie., on January 2000, 2001 and 2002 respectively.
1994 - A sophisticated latest technology tube mill for rolling bigger dia tubes was installed
and commissioned.
- During October, November the company issued 8,25,000 - 12.5% second non
convertible redeemable debentures of Rs.200 each with detachable warrants.
- Rs.200 of the face value of each debenture was to be redeemed in three equal instalments
at the end of 7th, 8th and 9th year respectively from the date of allotment of debentures ie.,
November 2000, 2001, & 2002 respectively.
- Each warrant entitles the holder to apply for one equity share of Rs.10 each at a prem. of
Rs.230 per share between expiries of 12 months from the date of allotment of debentures.
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1995 - A number of new sizes were added to the existing product range. A godown was
opened in Delhi & at Pune for sale of tubing.
1996 - The performance of the second bicycle plant at SAHIDABAD SHOWED an upward
trend mainly due to the newly introduced `Laser' series of bicycles and aggressive marketing
strategies etc.
- The third bicycle unit with a modern state-of-the-art plant is situated on 16 acres of land at
Malanpur, district Bhind, Gwalior. It has fully automatic computer controlled debasing pre-
treatment and paint plant. Overhead conveyors running into kilometres have been provided
for improved material handling.
Also, specially designed ramps have been provided for loading and unloading of trucks. - 7,
87,937 No. of equity shares allotted (prop. Rs.5 per share) against detachable warrants along
with 12.5% Right NCDs OF RS.200 each.
2000 - Noted Industrialist and Atlas Cycle Industries Ltd. preside nt Bishamber Das Kapur
passed away on 16th August night at the Escort Heart and Research Institute.
2001 - The name of the company be changed as `Atlas Cycles (Haryana) Ltd'.
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CORPORATE OVERVIEW
ATLAS has been India's brand leader in the bicycle segment with equal prominence on the
global platform. Ever pioneering and ever leading in bringing out the latest technology,
offering smart machines at affordable costs. Our growth dynamics is uniquely linked with
our consumers who drive us to keep innovating and excelling. It is our prime objective to
deliver the best quality product and services with upgraded R&D measures.
Realizing this we have set our objectives clear and pragmatic and that is to keep our
consumers at the center of our endeavors and produce the bicycles that are at par with
global standards. Our quest for better corporate performance and greater custo mer
satisfaction would very soon begin to show even better results.
New expansions. New entrants. At ATLAS, this is a process that never seems to stop.
An ATLAS cycle to suit every individual taste and requirement. A household name in cities
and villages across the length and breadth of the country. The promise of ATLAS. The
dream of one man fifty years ago. The dream continues. To clock new records, new
innovations, and new ventures.
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FiveDecadesofCyclingRevolution
Atlas name is synonymous with the cycling revolution in India. Since 5 decades the
Company has enjoyed a position of eminence and leadership in the Bicycle industry. This
was made possible because Atlas constantly strived to move ahead with never ending zeal,
technological up gradations, backward and forward integration and user friendly
innovations.
Atlas logo has been derived from Greek God depicting the legendary hero holding the word
on his shoulders. Thus Atlas assimilates in itself aspirations of the millions in their progress
and transition through various phases in their lives.
4MillionBicycles
Atlas is proud to be one of the top bicycle producing companies in the world, with a
capacity to produce 4 million bicycles per year. Today, Atlas has earned not only brand
loyalty but also millions of satisfied customers in India and abroad. This is corroborated by
the fact that Atlas Bicycles are being used in over 85 countries. Atlas always tries to access
customer needs and add value to the product. By following philosophy of continual up
gradation and improvement, it has adorned a culture that embraces quality. The company
has also been accredited with ISO-9001-2000 certification.
AGlobalPhe nomenon
With a perfect assimilation of styles, technology & a focus on customer needs, Atlas has
formed strong strategic alliances overseas.
By offering a wide range of products for almost all segments and age groups, it has strived
to be extremely market friendly and thus emerging as an internationally preferred br and. A
fact that is proven by its wide acceptance despite stiff market competition that is emerging
globally.
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TheRoadAhead
Keeping pace with the sprit of Racing Ahead of Times, Atlas is constantly trying to
innovate and offer products with a firm commitment to meet the emerging customer needs
thereby enhancing its brand image and acceptability in the global market place
Automated hi- technology machines at Atlas' continuously updated plants ensure precision
engineering, optimum application of manpower, and obtaining value of time. Accuracy is
determined to the smallest detail.
Quality Control
Dedication to quality is the unwritten code at Atlas. Every Atlas cycle undergoes a series of
uncompromising quality control tests before taking to the roads. Individual parts of every
cycle are checked for quality, endurance and road worthiness.
Seamless frame tubes are constructed from solid blocks of steel that are pierced and "drawn"
into tubes through several stages. These are usually superior to seamed tubes, which are
made by drawing flat steel strip stock, wrapping it into a tube, and welding it together along
the length of the tube. Seamless tubes may then be further manipulated to increase their
strength and decrease their weight by butting, or altering the thickness of the tube walls.
Butting involves increasing the thickness of the walls at the joints, or ends of the tube, where
the most stress is delivered, and thinning the walls at the center of the tube, where there is
relatively little stress. Butted tubing also improves the resiliency of the frame. Butted tubes
may be single-butted, with one end thicker; double-butted, with both ends thicker than the
center; triple-butted, with different thicknesses at either end; and quad-butted, similar to a
triple, but with the center thinning towards the middle. Constant thickness tubes, however,
are also appropriate for certain bikes.
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The tubes are assembled into a frame by hand-brazing or welding by machine, the former
being a more labor-intensive process and therefore more expensive. Composites may be
joined with strong glue or plastic binders. The components are generally manufactured by
machine and may be attached to the frame by hand or machine. Final adjustments are made
by skilled bicycle builders.
The most important part of the bicycle is the diamond-shaped frame, which links the
components together in the proper geometric configuration. The frame provides strength and
rigidity to the bicycle and largely determines the handling of the bicycle. The frame consists
of the front and rear triangles, the front really forming more of a quadrilateral of four tubes:
the top, seat, down, and head tubes. The rear triangle consists of the chainstays, seatstays,
and rear wheel dropouts. Attached to the head tube at the front of the frame are the fork and
steering tube.
For much of the bicycle's history the frame was constructed of heavy, but strong, steel
and alloy steel. Frame material was continually improved to increase strength, rigidity,
lightness, and durability. The 1970s ushered in a new generation of more
versatile alloy steels which could be welded mechanically, thereby increasing the availability
of light and inexpensive frames. In the following decade lightweight aluminum frames
became the popular choice. The strongest metals, however, are steel and titanium with life-
expectancy spanning decades, while aluminum mayfatigue within three to five years.
Advances in technology by the 1990s led to the use of even lighter and stronger frames made
of composites of structural fibers such as carbon. Composite materials, unlike metals,
areanisotropic; that is, they are strongest along the axis of the fibers. Thus, composites can
be shaped into single-piece frames, providing strength where needed.
The components, such as wheels, derailleurs, brakes, and chains, are usually made of
stainless steel. These components are generally made elsewhere and purchased by the
bicycle manufacturer.
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ASSEMBLING THE FRAME
The metal is annealed, or softened by heating, and hollowed out to form "hollows,"
or "blooms." These are heated again, pickled in acid to remove scale, and lubricated.
The hollows are measured, cut, and precision mitered to the appropriate dimensions.
Frame sizes for adult bicycles generally run from 19-25 inches (48-63 cm) from the
top of the seat post tube to the middle of the crank hanger.
Next, the hollows are fitted over a mandrel, or rod, attached to a draw bench. To
achieve the right gauge, the hollows pass through dies which stretch them into
thinner and longer tubes, a process called cold drawing.
The tubes may be shaped and tapered into a variety of designs and lengths. The taper-
gauge fork blades may have to pass through more than a dozen operations to achieve
the correct strength, weight, and resilience.
Tubes can be joined into a frame either by hand or machine. Frames may be brazed,
welded, or glued, with or without lugs, which are the metal sleeves joining two or
more tubes at a joint. Brazing is essentially welding at a temperature of about 1600°F
(871°C) or lower. Gas burners are arranged evenly around the lugs which are heated,
forming a white flux that melts and cleans the surface, preparing it for brazing. The
brazing filler is generally brass (copper-zinc alloy) or silver, which melt at lower
temperatures than the tubes being joined. The filler is applied and as it melts, it flows
around the joint, sealing it.
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The assembled frames are placed into jigs and checked for proper alignment.
Adjustments are made while the frame is still hot and malleable.
The excess flux and brazing metals are cleaned off by pickling in acid solutions and
by washing and grinding the brazing until it is smooth.
After the metals have cooled, further precision alignments are made.
Finishing
The frames are painted, not only to create a more finished appearance, but also to
protect the frame. The frame is first primed with an undercoat and then painted with a
colored enamel. Paint may be applied by hand-spraying or by passing the frames
through automatic electrostatic spraying rooms. The negatively charged frames
attract the positively charged paint spray as the frames rotate for full coverage.
Finally, transfers and lacquer are applied to the frame. Chrome plating may also be
used instead of paint on components such as the fork blades.
Depending on the style of bicycle, the gear shift levers are mounted either on the
down tube—popular on racing bikes—on the stem, or on the handlebar ends. A cable
is attached, which extends to the front and rear derailleurs. Front derailleurs, which
move the chain from one drive sprocket to another, may be clamped or brazed onto
the seat tube. Rear derailleurs may be mounted with bolt-on hangers or integral
hangers.
Handlebars may be raised, flat, or I dropped. They are bolted to the bicycle stem
which is then fitted into the head tube. The headset components, including bearings,
cups, and locknuts, are attached to the head tube. The headset allows the fork to turn
inside the head tube and thus makes steering easier.
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Brakes
The brake levers are mounted to the handlebars. Cables extend to the brakes and are
fastened to the calipers. Tape, made of plastic or cloth, can then be attached to the
handlebars and the ends are plugged.
Seat posts are generally steel or aluminum alloy and are bolted or clamped into
position. The saddle is generally made of molded padding and covered with nylon or
plastic materials. Although leather was the norm for saddles for a long time, it is less
commonly used today.
Cranksets
The crankset supports the pedals and transfers power from the pedals to the chain and
rear wheel. Cranksets consist of steel or aluminum alloy crank arms, chain rings, and
the bottom bracket assembly of axle, cups, and bearings. They are attached with bolts
and caps into the bottom bracket of the bicycle frame. The pedals are then screwed to
the ends of the crank arms.
Rear wheels are fitted with a free-/ wheel, consisting of several cogs and spacers,
which frees the rear wheel from the crank mechanism when the rider stops pedaling.
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Wheels are attached to the bicycle frame by means of an axle which runs through the
hub of the wheel. The axle may be tightened with bolts at the ends or with quick-
release skewers.
POLICIES
Quality Policy
Quality at ATLAS Cycles has been at the core of all the business operations. Every cycle that
rolls out of our production line bears the hallmarks of quality and excellence. This is
achieved through a stringent quality control system backed up by an intensive research and
development program. From working with alternative construction materials and enhancing
processing methods, to improving aerodynamics, progress and innovation, all aspects are
intertwined in our quest for better products and satisfied customers. Our production facilities
have been certified to be in compliance with ISO 9001:2000 standards.
Today, our products are built to standards that go beyond mere compliance to National and
International norms and strive to benchmark improved levels in quality and perfection.
Safety Policy
At ATLAS, we are committed to the safety and well being of all employees and personnel
who are in any way associated with our manufacturing operations. It is only through safe
working practices and by creating safe working environments that a workforce can be
encouraged and inspired to reach higher levels of productivity.
Consideration and understanding of safety and health in all aspects of our activities.
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Ze ro Tolerance Policy
At ATLAS Cycles, we have adopted a very stringent attitude to any irregularities in
operations such as:
Compromising on quality.
Theft or embezzlement.
ATLAS spends a sizeable amount of money every year in research and development
activities aimed at improving the product design, obtaining material optimization, improving
surface finishing methods as well as better handling and packaging techniques.
A highly developed research and development wing of ATLAS is the only center of its kind
in India. This in- house R & D center is a totally computerized unit, recognized by the
Government of India. It conducts continuous intense research and development activities in
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every area related to the modern bicycle industry - including research in alternative
materials, developed processing, kinetics, aerodynamics, reduction of human fatigue and
other various innovative technologies
Atlas Cycles (Haryana) Ltd., Sonepat, has the privilege of being the only Indian complete
bicycle manufacturing unit whose in house R&D unit has been recognized by the
Department of Scientific & Industrial Research, Ministry of Science & Technology,
Government of India. Our R&D Centre is well equipped with Computer Aided Designing
facility, prototype making facility and testing facilities etc.
Atlas R&D concentrates on development of new models of bikes ranging from Kids to
Mountain Bikes, City Bikes, Suspension Bikes, Sports Bikes etc.
Atlas spends a sizeable amount of money every year on research and development activities
aimed at improving the product design, obtaining material optimisation, improving surface
finishing methods as well as better handling and packing techniques.
Atlas is the only complete bicycle producing unit in India to have beer accorded recognition
for its in- house Research &. Development unit by the Government of India.
LABOUR RELATIONS
Company has extended complete freedom of association to its workmen and effective
recognition of their right to collective bargaining. Atlas workmen have their own elected
Worker's Union registered under Government Act. The Union is recognized by the
Government and the factory. The Union has been given the natural light for collective
bargaining in the common interest of working force. Cordial industrial relation is maintained
in the factory. The Grievance Redressal Procedure is updated from time to time. The labour
welfare activities and programmes are organized by the factory as an ongoing process
throughout the year which has played an important role in establishing an atmosphere of
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mutual trust and harmony. The company is running smoothly since last more than two
decades without any workers unrest.
Products:-
Manufacturers and Exporters of BICYCLES, BICYCLE PARTS & STEEL TUBES :-
Mountain Bikers : - M s 21 Speed - M S V2 - Velocity 18 Speed - Center shox - Ninja
Deluxe - Inferno - nucleus - stud - viper - vogue - pacific - Double impact - Tank - Spice-G
City Bikes : - Swan Aslr-G - ASLR-L - ASLR-LC - MONALISA Childeren Bikes : -
CRAZY TOONS - KINDS CLUB - WEB KING - SNIFFER - HIGH RISER DX - BRAVE
- CHEETAH - HUMPTY BUMPTY - BIRDY - BUNNY - CHEETAH DX - SEIFT -
ABCMISCHIEF-BMX - AHR DX Roadsters : - GOLDLINE SUPER SB - LADIES -
GIRLS - BOYS - SOLDIER - SUPER STRONG - COMMANDO - SMARAT -
SILVERLINE - SUPERME - LOW GRAVITY - AGRD 24 - ASB-SA-STT - ASB-SA-DTT
- SUPER STRONG - AGRE - APGR - ALC - BOSS - DOVE - ABD - ALP Fancy Bikes : -
MONTANA - INFERNO - VELOCITY - TURBO - SLR GENTS - CONCORDE PRO - X-
CEL - ZOOM - DIAMOND - NUCLEUS - PACIFIC - DOUBLE IMPACT - VIPER -
VOGUE - STUD - TANK - CENTRE SHOX - PACIFIC JR. - NUCLEUS JR. - INFERNO
JR Ladies Bikes : - SLR LADIES - MONICA - DOVE - SPARKLE - TULIP - DOVE VX -
MONALISA - SWAN - SPICE-G Exercisers : - AEX - ABK DX
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MISSION AND VISION:-
The Vision
"They, at the Atlas Group are continuously striving for synergy between technology, systems
and human resources to provide products and services that meet the quality, performance,
and price aspirations of the customers. While doing so, they maintain the highest standards
of ethics and societal responsibilities, constantly innovate products and processes, and
develop teams that keep the momentum going to take the group to excellence in everything
they do."
"Its their mission to strive for synergy between technology, systems and human resources, to
produce products and services that meet the quality, performance and price aspirations of
their customers. While doing so, they maintain the highest standards of ethics and societal
responsibilities. "
This mission is what drives them to new heights in excellence and helps them to forge a
unique and mutually beneficial relationship with all their stakeholders. They are committed
to move ahead resolutely on this path, shown to them by visionary Mr. Late Janki Das
Kapur.
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ACHIVEMENTS:-
ATLAS bicycles today run ever street and by- lanes of India, as well as on the far flung roads
of the United States, Germany, Holland, Denmark, Australia, Japan, Egypt and Zambia
among others. The numero Uno position has been maintained due to its adherence to quality
and good workmanship, notching up many ‗firsts‘ in the cycle industry.
1982 : They hold the rare distinction of getting sole franchise as official supplier of
bicycles to Sixth Asiad Games held at New Delhi
1987 : They launched the 5 & 10 Gears model for the first time in India
They are the first Indian cycle manufacturers to introduce twin suspension double
shocker bike
They are the first to produce bicycles with power brakes. ATLAS Macho cycle was
one of the leading models in the market for several years
They were presented with the FICCI Award for 'Best Industrial Relations'
Introduced India's First Cricket Bike followed by immediate success
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Previous Brand Ambassadors
Sunil Shetty (Bollywood Actor)
Sania Mirza (Tennisplayer)
Robin Singh (Cricketer)
Premchand Degra (Body Builder & Mr. Universe 1988)
Atlas Cycle Haryana Ltd is all set to enter the African continent, the UK, East Europe and
Russia. The company started exporting bicycles in 1958 and at present, the cycles are used in
over 50 countries.
―Atlas has sold over 17 lakh cycles in fiscal 2003-04. The company is aiming to increase
this figure to about 20 lakh. The company recorded a turnover of Rs 340 crore in 2003-04,‖
Girish Kapur, joint president, Atlas Cycles, said. Atlas is planning to launch Samrat range of
bicycles. The company has more than 50 models with over six models for women, 20 to 30
in the fancy sports category and eight to 10 kids‘ models.
Atlas said the company has a 28 per cent share of the bicycle market. The major players in
the market are Hero, Atlas, TI Cycles and Avon.
Bicycle makers in the country post 5 per cent growth a year, but in the current fiscal year,
Atlas has registered a growth of over 15 per cent, the company said.
Kapur said, ―The Union Budget has a lot of pro-poor proposals. However, the common
man‘s vehicle would get costlier as excise duty on steel has increased by four per cent. The
bicycle industry has seen a 25 per cent hike in raw material and steel prices in the past six
months.‖
Atlas has manufacturing units at Sahibabad in Uttar Pradesh, Malanpur in Madhya Pradesh
and Sonepat in Haryana.
―Atlas is the only Indian bicycle company with a complete manufacturing unit whose in-
house research and development unit has been recognised by the department of scientific and
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industrial research, Union ministry of science and technology. The company has a modern
paint application unit at Sahibabad,‖ said Kapur.
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Despite of slump in market Atlas cycle ltd posted 22.78 per cent increase in net profit of Rs
97 lakh for the fourth quarter ended March 31, 2009, compared with Rs 79 lakh recorded
during the same period a year ago.
The latest bikes are for the urban kids. This sizable population has the tendency to facsimile
the West, especially in their lifestyles. And since the adventure sport is growing rapidly
there, we hope a good response in India too. There is a good chance of increase in sales of
hi-end products is expected to grow with the Commonwealth games in 2010.
An eco-friendly mode of transportation, bicycles are being revived across the world and the
steps are taken, especially by the symbols of modernization, like the Metro in the capital in
encouraging commuters to pedal their way to their destinations.
The country today is on the threshold of globalization and teaming million are looking for
higher level of growth together with equitable distribution of income to improve their lots.
Generally the economic signs appear to be favorable fo r the country to improve its
performance and in turn improve the lot of its people. Obviously; this improvement is going
to reflect upon the Bicycle Industry in particular and transport segment in general. With
customers of the country aspiring for higher and higher the current Bicycles users will be
graduating to auto two-wheelers, but there will be a new population looking to the bicycle as
means of transport. Similarly a new generation of buyer will look to bicycle as a mean of
leisure recreation and good way to keep fit.
We, therefore, see a healthy sustained growth of cycle industry. Presuming that growth of
last 3-4 years is sustained for next 10 years i.e. the time we reach the year 2010, the Indian
bicycle industry would need to produce about 1.75 crore bicycles to plug the demand and
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supply gap. However, there will be a change in the demand pattern linked with consumer
changing aspiration and choice giving way to latest technology and newer marketing
concepts. Industry is already witnessing this to some extent.
The new millennium has brought new challenge of opening up of import of Cycles. The
manufacturers in India agree to the point that Indian Bicycle Industry does not foresee any
problem as the product offered today by Indian manufacturers in the market are best suited
to Indian conditions and are most economical and value for money products.
Indian economy is doing fairly well as the agricultural and industrial growth overall is
showing favorable trend for last quite some years. Good monsoons and good efforts to give
leverage to the trade has helped our economy boost. The developments made at technology
front especially in software and electronic field has made every entrepreneur quite
enthusiastic about future. The benefits of these developments, technology coupled with
favorable atmosphere has percolated to the consumer as well who now has a wider choice at
very competitive rates.
The growth rate of Roadster bicycle is expected to slacken and the newer segments of the
market like fancy bicycles will grow far more rapidly. It would not at all be surprising if by
2010 the fancy bicycles and roadster bicycles have almost equal market share against
existing 20% market share of fancy bicycles. This switch over will not be easy one and will
require a total redefining of industry to meet the new challenges. The fancy bicycle require
for greater flexibility in manufacturing, much tighter quality management; being wide in
rage and variety - require for more efficient supply chain management, far more impro ved
after-sales-service to the increasingly demanding consumers and most important; change in
retail ambiance.
In fact, the worlds over markets are behaving in similar fashion and product features have
become alike all over. New segments are emerging and to cater such markets, newer models
with world class features are being introduced in Indian markets at regular intervals. Hero
Ranger Swing revolutionized the multi- geared segment and has created a niche for itself
Ranger-M, Piranha, Queen, Active, Charmeleon and Hero Neon have been clear cut winners
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and have taken the market by storm. This increasing segmentation is Mantra for success in
today's environment of high expectations and low brand loyalty.
We at Hero have taken into our stride to these impending changes and are prepared to meet
the challenges thus posed so that the benefits of these changes are reaped. The initiative for
the change in durable consumer industry has to be driven by the manufacturers. This will be
through investment in more flexible plant and machinery to produce more contemporary
bicycles in much shorter turnaround time. We have to look into the entire gamut of the
market and help our retail outlets to improve their ambiance to the customer, to pull them to
their shops.
On the whole the future for Indian industry including Bicycle will be challenging. The
domestic market will be open to good and services from global companies with low tariffs.
Protection will be a thing of the past. The companies that will survive will be those which
successfully restructure and modernize to achieve global competitiveness in terms of both
quality, cost and distribution system.
24
INDIAN CYCLE INDUSTRY:-
Bicycle was seen in India in the year 1890. Import of cycles, however, started in 1905 and
continued for more than 50 years. Complete ban on imports was announced by the
Government in July, 1953, but cycle kept on simmering in the country till 1961. In 1890,
selling price of an imported bicycle was around Rs. 45/-; in 1917, during the First World
War the price jumped to Rs. 500/- but dropped considerably, month by month and came
down to Rs. 35/- or so (U. K. makes) and Rs. 15/- or so (Japanese models).
It would be interesting to mention that in 1919, five persons in Punjab imported cycles and
used them on The Mall, Simla. These included one Bishop, Two military men and two
contractors including S. Pala Singh Bhogal (Grand Father of Mr. M.S. Bhogal of Ludhiana).
Under special permission of the Governor, they were allowed to use cycles on 'The Mall'
only for one hour in a day. They imported B.S.A. Cross Bar Cycle from U.K. and it used to
be a kind of Mela at that particular hour on the Mall in Simla, the scene watched by
hundreds of people every day. Later, a firm was formed under the name of Singh & Co. with
shops on Railway Road, Jalandhar and Bazar Vakillan, Hoshiarpur, which imported bicycles
in the year 1930 onwards.
With an annual turnover of more than 12 million bicycles, the bicycle industry is one of the
most established industries in India. It has raised the country's position to that of the second
largest bicycle manufacturer in the world, next only to China. India has seen a tremendous
increase in the number of bicycle manufacturers and bicycle exporters in the recent past.
Today, the Indian bicycle manufacturing and bicycle spares industry is well accepted and is
also widely recognized for its quality standards in international markets.
Most bicycle components, spares and bicycle accessories in India, except for free wheels and
single piece bicycle hubs, are manufactured by the Small Scale Sector (SSIs), while the large
scale units are permitted to manufacture bicycle frames, chains and rims for captive
consumption. Manufacture and export of complete bicycles falls within the purview o f the
Organized Sector. The Indian bicycle industry is currently in the midst of making endeavors
25
for enhanced and increased bicycle exports since the scope for export of Indian
manufactured bicycles in the international market is significant.
The bicycle industry has been on an upswing in the last few years. Major players are
increasingly turning to innovative product features to capture the market. In fact the bicycles
have donned a 'new avataar'. After years of sluggish growth and zero innovation, the
industry has been witnessing a flurry of activities.
Bicycle manufacturers are flooding the market with sleek, trendy and colorful models. The
customers suddenly found that they have a wide choice to meet every need and taste. The
fancy bicycle, for that matter new wave bicycle sector, thus began growing. However, the
growth rate is indeed dramatic as compared to the growth of conventional bicycles.
Market and customer focus "Wake up every morning terrified", said Jeff Bezos - Time
Magazine's 'Person of the year', "not of the competition but of our customers." This profound
observation sums up: "Customer is the King". The key to survival is, therefore, the ability to
learn and change. The customer profile is changing fast. Resultantly, the market-place today
is in a constant state of change and constantly changing markets require a sensitive feel,
careful analysis, flexible thinking and rapid action on the part of bicycle industry for
survival.
26
The bicycle industry is facing an ever growing menace of inflation. The all round increase in
the costs of inputs has necessitated the periodical upward revision of rates, much to the
dismay of dealers and customers. The unavoidable phenomenon can only be met by
The new Exim policy announced by the Government of India in tune with the liberalization
policy pursued has put bicycles in the Open General License (OGL) thus paving the way for
the presence of foreign brands in the Indian market.
To meet the challenge from the foreign brands, the need of the hour is to make ceaseless
efforts for updating the models with stress on strength and optics based on International
quality standards. In other words, a dent can be made to take on foreign brands only by
faithfully enforcing ISO series quality norms by maintaining rigid quality standards at every
stage of production, up gradation of technology, strong Research and Development (R&D)
base and effective monitoring.
Once the industry is able to achieve sustained desired quality standards, the industry shall be
in a far better position in gaining competitive edge over foreign brands. The earlier it is
achieved, the better for the Indian bicycle industry, as the challenge is 'real' and has come to
stay.
Interestingly enough, the West is rediscovering the virtues of non- motorized transport,
especially bicycle. It is gathered that "countries like Finland have three bicycles for every
five persons. In some American States, it is mandatory for companies/firms employing more
than 100 persons to provide incentives for using bicycle. In Europe, trains and buses have
27
special space for carrying bicycles and Railway Stations provide more parking area for
bicycles than cars."
This explains how well the 'bicycle concept' has caught-up in advanced Western countries.
With Government of India putting up priority on 'market economy', it is for the Indian
bicycle industry to hold a solid edge in the world market.
Most state governments have special schemes that involve gifting bic ycles to people, mostly
children, in the economically weaker sections of the society. Such is the impact on this
industry that the government is one of the biggest customers for bicycle manufacturers. State
governments invite tenders for supply of bicycles and the big players get to make the most of
it.
The central and state governments are believed to have ordered around 1.5 million bicycles
in 2008 to hand them over to poor children under various social welfare schemes. An
industry source estimates that the figure could go up to 2.5 million units in 2009. States like
Maharashtra, Madhya Pradesh, Bihar and Jharkhand are among those supplying bicycles free
of charge to poor school- going children. The Assam government has made a provision for
Rs 24 crore in 2008-09 for providing bicycles to about one lakh girl students living below
the poverty line. The Haryana government has supplied bicycles to certain schools under the
Sarv Shiksha Abhiyan scheme. The bicycles are to be provided free of charge to those girl
students who have to walk more than 2 km to school.
The Tamil Nadu government also runs schemes to encourage higher education among the
Scheduled Castes/Scheduled Tribes, Scheduled Caste converted Christians studying in
classes XI and XII in government and government-aided schools, under which free bicycles
are distributed to students.
Despite the slowdown, the bicycle industry is booming, thanks to government tenders for
more bicycles
28
Market share of various brands in cycle industry:-
The present scenario of cycle industry can be well seen in this graph. It can be observe that
Hero industry is well leading the cycle industry having 35% share where as second place is
taken by Atlas cycle having 24% share. But in recent study and the conclusion given by
researcher it is being said that Indian player are going to face biggest threat from Chinese
manufactures. The threat of Chinese cycles priced around Rs. 500- 700 flooding the Indian
market that would ultimately pedal out the Indian players. "It is all media hype to unrealistic
levels as Chinese cycles didn't materialise here as predicted. However the reports had one
effect, that is postponing purchase decision by the people,".
China like India is a major exporter of bicycles and is much bigger than Indian industry.
Firstly it should be noted that bicycles were removed from the bonded category more than a
year back. Contrary to the expectations there was no major influx of bikes from China
producing around 22 million cycles per annum (p.a.). This despite the fact that bicycles
comes next only to wristwatches in market penetration in India.
29
The reasons for this phenomenon is varied like investing in crucial activities like setting up
assembly line, brand building, putting in place proper sales and service network and finally
the market scenario. Of all the above the last one is what favours Indian industry.
The 12- million units p.a. Indian bicycle industry could be classified into two categories viz a
standard roadster and specials. The latter includes mountain terrain bikes (MTB) and
children's cycles. However demand is skewed more in favour of standard roadster segment
to the extent of 65-70 per cent with most of the sales coming from semi- urban and rural
areas.
Coming back to the import threat, a Chinese roadster costs $25 (CIF) or around Rs. 1,150
and if one adds 40 per cent import duty the price goes up to Rs. 1,610. "On this charges like
freight, overheads etc have to be added and it will make the Chinese bicycles dearer than
ours,".
Ultimately cost cutting has to be the mantra for Indian industry to stay afloat. An Indian
team sometime back visited China to find out how the Chinese bicycle manufacturers attain
cost competitiveness. However the team was not successful in unravelling the mystery.
But using plastic components would make the Indian p layers much more competitive. While
the domestic industry will raise the issue of durability, it should be borne in mind that there
are strong plastic compounds that are available now. One shouldn't forget that car bumpers
are now made of plastics. All that a cycle buyer looks for is a functional bicycle of good
quality and not a heavily steeled one.
30
Sources of Data:-
31
OBJECTIVE OF PROJECT:-
The object of project is to study and analysis the Financial and cost statement of the
Atlas cycle ltd.
The study is about analysing the growth pattern of company with the help of
statements.
To carry out analysis of financial and cost statements of Atlas Cycle ltd using ratio
analysis.
To find out weakness and cost reduction techniques which would be beneficial for
company, to increase profit and reduce its loss.
Corporate world is totally different from what we perceive on our own. The method what we
use to prepare financial statement and cost statement are totally different from what we have
studied in book. But continues guiding by my corporate guide Mr. Ashok Gupta and other
32
Concern person in the company it become clear that tools and techniques that are used in the
preparation of these statement are different.
33
CHAPTER. 2
REVIEW LITERATURE
34
REVIEW LITERATURE
A literature review can be just a simple summary of the sources, but it usually has an
organizational pattern and combines both summary and synthesis. A summary is a recap of
the important information of the source, but a synthesis is a re-organization, or a reshuffling,
of that information. It might give a new interpretation of old material or combine new with
old interpretations. Or it might trace the intellectual progression of the field, including major
debates. And depending on the situation, the literature review may evaluate the so urces and
advise the reader on the most pertinent or relevant.
Besides enlarging our knowledge about the topic, writing a literature review let us gain and
demonstrate skills in two areas
1. information seeking: the ability to scan the literature efficiently, using manual or
computerized methods, to identify a set of useful articles and books
2. critical appraisal: the ability to apply principles of analysis to identify unbiased and
valid studies.
35
Why do we write literature reviews?
Literature reviews provide you with a handy guide to a particular topic. If you have limited
time to conduct research, literature reviews can give you an overview or act as a stepping
stone. For professionals, they are useful reports that keep them up to date with what is
current in the field. For scholars, the depth and breadth of the literature review emphasizes
the credibility of the writer in his or her field. Literature reviews also provide a solid
background for a research paper's investigation. Comprehensive knowledge of the literature
of the field is essential to most research papers.
The topic as well as industry selected for the project is very vast in itself and there are lots of
researches and studies already have been done by many researchers. To start with work done
in the field of cycle industry.
Wan-we n Chu*
*
Academia Sinica Taipei, Taiwan
Abstract
This paper looks at the history of Taiwan's bicycle and parts industries and examines the
lessons that can be learned from it. The initial impetus for the big change came in the form of
large OEM orders from the American importers, which was prompted by the sudden US
demand surge in 1971–74. Taiwan out competed other places, because its industry was able
to respond quickly in terms of production capability and entrepreneurship. This was as a
result of accumulated learning under import-substitution, and from the favourable factors on
the overall and industry level in Taiwan. Conditions in Taiwan fostered the emergence of
numerous SMEs, which helped the development of a parts suppliers' network. All three
factors—accumulated learning, a favourable environment, and globalisation of production—
were necessary conditions for the growth of Taiwan's bicycle industry.
36
.
Racing and Back-Pedalling into the Future: New Product Introduction and
Organizational Mortality in the US Bicycle Industry, 1880-1918
Glen Dowell
Anand Swaminathan
We hypothesize that some overlap of production between and within product generations
reduces firm mortality, as it allows firms to retain valuable routines. Excessive overlap,
however, becomes harmful. An analysis of the effects of new product introduction on
mortality rates among the population of US bicycle producers over 1880-1918 supports our
hypotheses. Our results suggest the value of separating out the content effects of innovation,
which are often positive, from the process effects which tend to be disruptive.
Article
Inte r-organizational Network and Firm Performance: The Case of the Bicycle Industry
in Taiwan
Abstract.
37
industry of Taiwan, we explore whether involvement in strategic network organizations can
be a valuable aid to competitiveness. In particular, we find that company performance
benefits from strong network functions in the technology and marketing made available by
such inter-firm relationships. Our findings confirm that those producers with more
collaboration with other firms within their industry perform better than otherwise
comparable firms with fewer cooperative activities. Consistent with our argument within the
supplier–buyer relationship in the industry, our statistical analyses also suggest that suppliers
retain a more proactive strategic behaviour in managing business networks than buyers.
Suresh Kotha
Abstract
In many industries the dominant paradigm, `mass production,' is being challenged by the
emerging paradigm, `mass customization.' Accordingly, many researchers posit that firms
which replace `mass production' with `mass customization' will gain a significant
competitive advantage. Based on an in-depth study of the National Bicycle Industrial
Company (NBIC), this paper explores the dynamics o f pursuing both mass production and
mass customization strategies simultaneously. At the operational level, the paper discusses
the organizational mechanisms instituted by the NBIC in order to benefit from the
simultaneous pursuit of both approaches. At the competitive level, it isolates the relative
38
contributions of both approaches to the overall competitive positioning of this firm in its
industry. Based on this discussion, it provides a framework that illustrates the dynamics
involved in the pursuit of both approaches. Implicitly, the paper argues that for firms
competing in rapidly changing environments the ability to maintain a sustainable
competitive advantage depends on the firm's capability to create knowledge by interacting
both mass customization and mass production approaches. Finally, the paper concludes with
managerial and research implications regarding the emerging paradigm of mass
customization.
Abstract
By means of a detailed study of the National Industrial Bicycle Company of Japan (NIBC),
Suresh Kotha examines the dynamics of implementing mass customization in a firm that
pursues both mass production and mass customization in two different factories. NIBC reaps
superior returns by employing a ‗system‘ which increases interaction between the mass
production and mass custom factories and encourages knowledge creation.
39
The author then considers the most important external (industry level) and internal (firm
level) conditions which are necessary to successfully pursue mass customization, and points
out that the interactions and interrelationships between them are important to a successful
outcome too.
Sukhpal Singh
Like many other industries, bicycle production in India developed after Independence. But
unlike most other industries which remained concern treated in metropolitan centres, bicycle
manufacturing took roots in up country towns, defying competition from metropolitan
enterprises. This paper, discussing the factors responsible for the success of the northern
entrepreneurs, emphasises that various concessions given by the government to the refugees
from Pakistan played a critical role.
Cons umer Product Safety Regulation in the United States and the United
Kingdom: The Case of Bicycles
This study analyzes the effect of bicycle safety regulation in the United States and the
United Kingdom using data on monthly injury rates. Unlike many previous studies of
product safety regulation, a specific product regulation is analyzed, and long data
series are available. In both countries, the regulation led to a significant decrease in
40
accidents per bicycle in use. The effect in the United States is larger than in the United
Kingdom.
Abstract:
In the United States, accidents inside the home, in the workplace, and outside of
the home and work injure millions of citizens every year. In particular, accidents
associated with consumer products injured about 30 million people in 1986 and resulted
in 21,600 deaths. The consequences of these accidents impose a large and serious cost
on the country, justifying extensive efforts to understand them.
The traditional approach to attacking the consumer product safety problem has
been the imposition of direct standards on product design. Paradoxically, the academic
literature on the effectiveness of safety standards provides little evidence that design
standards have any significant effects. Worse yet, this literature suggests that in some
cases the standards can actually lead to increases in the frequency and severity of
accidents.
Loeb et al.
ABSTRACT
A multispeed, chainless bicycle drive and transmission system wherein the drive train
includes a shift able drive shaft connecting the pedal crank shaft and driving wheel by means
of vertical gear wheels mounted transversely thereon having a multitude of concentric series
41
of gear teeth for providing different drive or gearing ratios. The geared drive shaft is moved
from one series of gear teeth to another on one or both of the gear wheels to change the gear
ratio by means of two independently moving, splinted, concentric shaft members which mate
through contact gears with the selected gear teeth series. The splinted shaft members are
mounted within a tubular housing via three ball bushings which permits both longitudinal
and rotational movement of the enclosed shaft members. A spring- loaded ball system is used
to assure proper relative positioning of the splined shafts with respect to the selected gear
teeth series.
Wu Hung Sheng et al
ABSTRACT
A charging device for charging an electric bicycle includes a charger which is received in the
trunk ol a vehicle and electrically connected to the battery ol the vehicle by a conductive
wire. A wire extends from the charger and is detachably connected to the rechargeable
battery ol the electric bicycle which can be received in the trunk or carried on the vehicle by
a bicycle carrier attached to the vehicle. The conductive wire has the first end connected to
the charger and the second end having an adapter which is received in the cigarette lighter
receptacle hole in the vehicle.
42
These are some of the previous studies done by researchers. Now the research work done
related to topic of my project.
Mingyi Hung
Abstract
Using 17,743 firm- year observations of industrial companies in 21 countries from 1991 to
1997, this paper finds that the use of accrual accounting (versus cash accounting) negatively
affects the value relevance of financial statements in countries with weak shareholder
protection. This negative effect, however, does not exist in countries with strong shareholder
protection. These findings are consistent with the belief that shareholder protection improves
the effectiveness of accrual accounting, and suggest the importance of considering
shareholder protection when formulating accounting policies related to accruals.
Scott L. Summe r
Abstract
The study investigates the relationship between insider trading and fraud. They found that in
the presence of fraud, insider reduce their holdings of company stock through high level of
43
selling activity as measured by either the number of truncations, the number of share sold ,
or the dollar amount of share sold. Moreover they represent the evidence that a cascaded
logit modal, incorporated insider trading variable and firm specific financial characteristics,
differentiate company with fraud with company without fraud.
Abstract
This paper describes an operational discriminant model for the identification o f British
companies at risk of failure and discusses the results from its application since it was
developed and its degree of inter temporal validity. It raises a number of issues related to the
use of multivariate statistical techniques in the finance area and highlights some of the
methodological weaknesses in extant studies.
Abstract
Balance sheets and income statements are numerical decompositions of certain total sums:
total assets, total liabilities, total sales, and total costs and expenses. The behavior of
individual items measured as fractions of the corresponding total is important for the
analysis of the company's financial position. It will be argued in this article that certain
concepts derived from information theory are useful as summarizing descriptive devices for
changes in such fractions as well as for the analysis of differences between companies of the
same industry.
44
Five-Hundred Life-Saving Interventions and Their Cost-Effectiveness
Tammy O. Tengs , Miriam E. Adams , Joseph S. Pliskin , Dana Gelb Safran , Joanna
E. Siegel , Milton C. Weinstein , John D. Graham
ABSTRACT
45
The Dixit lectures are of special interest for several reasons. First, Professor Dixit is a master
of modern neoclassical analysis and game theory. This, of course, is not a sufficient
condition for having anything interesting to say about political economy. Many from the
mainstream who dabble at political economy seem almost totally unaware of the careful
work developed by the rational politics and public choice research programs over the past
thirty years. This often leads their political economy to be rather light on politics – especially
regarding significant institutional features like elections and interest groups. In such cases,
one may still learn a bit about processes of collective decision making but mostly one learns
about the still limited penetration of public choice contributions into mainstream economic
thought. The extensive reference list developed by Professor Dixit provides an illustration of
this. Only about 10 percent of the references are from the public choice and rational politics
literatures. Only Buchanan, North, Olson, and Shepsle are cited more than once among
prominent public choice researchers.
46
A Transaction Cost Analysis and Propositions, by Erin Ande rson and Hubert
Gatignon © 1986 Palgrave Macmillan Journals.
Abstract
Abstract
This paper presents a literature review of quality function deployment (QFD) based on a
reference bank of about 650 QFD publications established through searching various
sources. The origination and historical development of QFD, especially in Japan and t he US,
47
are briefly accounted first, followed by a partial list of QFD organizations, softwares, and
online resources. Then a categorical analysis is conducted about QFD‘s functional fields,
applied industries and methodological development. Ten informa tive QFD publications are
also suggested, particularly for those who are not yet familiar with QFD. It is hoped that the
paper can serve the needs of researchers and practitioners for easy references of QFD studies
and applications, and hence promote QFD‘s future development.
Takeyuki Tani
Abstract
This paper discusses target cost management (TCM) from the viewpoint of simultaneous
engineering. Firstly, it shows empirically how simultaneous engineering is implemented in
Japanese companies. Secondly, it formulates and then tests hypotheses on the influential
power of managers involved in the process of target costing. Thirdly, it describes processes
of interactive control directed at information and value sharing among managers that help
explain why simultaneous engineering is working effectively in Japanese companies. It also
formulates and tests hypotheses on information and value sharing among managers.
Fourthly, it concludes that interactive control in TCM helps generate unique ideas for
product development and cost reduction, and that Target Cost Management is a key
subsystem of strategic cost management.
48
THE FUTILITY OF UTILITY ANALYSIS
ABSTRACT
In a study involving 143 experienced managers, utility analysis was found to influence
managerial decision making, but not in the way intended by advocates of this technique.
Utility analysis reduced the support of managers for implementing a valid selection
procedure, even though the analysis indicated that the net benefits from the new procedure
were substantial. In light of these findings, industrial/organizational psychologists are
advised to reconsider their assumptions regarding the information manage rs use when
managers make human resource policy decisions.
Abstract
Defense firms typically produce a large number of products. The purpose of this article is to
explain how two features of the current regulatory process create a significant incentive for
these multiple-product firms to choose inefficient production methods. The first feature is
that the marginal impact of accounting cost on price varies significantly among products.
Prices for a defense firm's products are set according to a rather unique process that
combines elements of both competition and cost-based regulation. Defense firms typically
produce some purely commercial products and prices for these products are competitively
determined. Aside from standard off- the-shelf items such as army boots, most defense
products are purchased from a sole source and thus their prices are nominally cost-based. In
reality, the negotiated price is likely to be affected by other factors as well. In particular, in
49
cases where closer substitutes exist or where an alternative source might not be prohibitively
expensive, the potential cost of these alternatives plays a role. The important consequence of
this is that the negotiated price will not necessarily decline or rise by a full dollar when the
projected cost of production declines or rises by a dollar. In more competitive procurements
where the cost of alternatives plays a stronger role, changes in projected accounting cost are
less important. The second feature of the regulatory process concerns the method that
defence firms are allowed to use to calculate the cost of each product. Following traditional
commercial accounting practices, only a relatively small fraction of costs are directly
charged to products. The remaining costs are grouped together into overhead pools and
allocated across products usually in proportion to directly charged labour use. These two
features create the following incentive problem. Given the first feature, the firm would like
to be able to assign more of its costs to well- funded sole source procurements instead of to
more competitive procurements or commercial products. The second feature provides a
method for accomplishing this task. Namely, the firm can increase (decrease) the amount of
overhead allocated to a contract by increasing (decreasing) the amount of direct labour used
on the contract. This means that the firm will have an incentive to engage in pure waste by
padding direct labour usage on contracts with cost sensitive revenues. It will also have the
incentive to distort its input substitution decisions between labour and other inputs by using
too much (too little) direct labour on contracts with cost sensitive (cost insensitive) revenues.
Two major types of input substitutes for labour exist. The first is capital. Thus, we would
expect the firm to purposely under-capitalize production of products with cost sensitive
revenues and over-capitalize production of products with cost insensitive revenues. The
second possible input substitute is material. For many subcomponents of a weapon, a firm
has the potential option of subcontracting production to another firm or making the
component in- house. Subcontracting will result in higher direct material costs for the firm
but lower direct labor costs. Thus, engaging in more in- house production is essentially a way
of substituting towards direct labor and away from direct material. In particular, then, we
would expect the firm to purposely engage in too much in-house production for its products
with cost sensitive revenue and too much subcontracting for its products with cost
50
insensitive revenue. An important point to note about this incentive effect is that it does not
require the firm to report any cost projections untruthfully. That is, in the behaviour
predicted by this article, the firm does not make money by projecting that costs will be high
(in order to get a high price) and then actually having low costs. The firm actually spends all
of the money that is charged as a cost. The profit occurs through shifting the assignment of
these costs. The importance of this point is that auditing is very poorly equipped to deal with
this type of behaviour. Auditing is relatively good at determining whether the firm actually
spent as much as it projected. However, it is relatively poor at determining whether any
expenditure that actually occurred was necessary. Braeutigam and Panzar (1989), Brennan
(1990), and Sweeney (1982) have analyzed models of pub lic utility regulation where the
utility has commercial business segments. They make the general point that, depending upon
how costs are allocated, the firm may have an incentive to distort its output and/or input
decisions in order to shift overhead to the regulated sector. However, none of these articles
analyzes allocation schemes based on direct labour or any other input base. Braeutigam and
Panzar (1989) and Sweeney (1982) consider allocation schemes based on units of output
under the assumption that comparable units of output exist across different products.
Brennan (1990) considers allocation schemes where each product is allocated a fixed,
invariant share of overhead. Thus all of the predictions of this article regarding the particular
sorts of input distortions one would expect to see in defence procurement are new to this
article. Furthermore, on a technical level, the model of this article is also somewhat different
because it considers a multiple product case where products are not necessarily either
perfectly competitive or perfectly regulated and the level of competitiveness varies from
product to product.
Better Medicare Cost Report Data are Needed to Help Hospitals Benchmark
Costs and Performance Magnus, Stephen A.; Smith, Dean G.
51
Abstract
To evaluate costs and achieve cost control in the face of new technology and demands for
efficiency from both managed care and governmental payers, hospitals need to benchmark
their costs against those of other comparable hospitals. Since they typically use Medicare
Cost Report (MCR) data for this purpose, a variety of cost accounting problems with the
MCR may hamper hospitals' understanding of their relative costs and performance.
Managers and researchers alike need to investigate the validity, accuracy, a nd timeliness of
the MCR's cost accounting data.
Abstract
Background: Insecticide-treated nets (ITNs) are an effective and cost-effective means of
malaria control. Scaling- up coverage of ITNs is challenging. It requires substantial resources
and there are a number of strategies to choose from. Information on the cost of different
strategies is still scarce.
To guide the choice of a delivery strategy (or combination of strategies), reliable and
standardized Cost information for the different options is required.
Methods: The electronic online database Pub Med was used for a systematic search of the
Published English literature on costing and economic evaluations of ITN distribution
programmes.
The keywords used were: net, bed net, insecticide, treated, ITN, cost, effectiveness,
economic and evaluation. Identified papers were analysed to determine and evaluate the
costing methods used.
Methods were judged against existing standards of cost analysis to arrive at proposed
standards for Undertaking and presenting cost analyses.
52
Results: Cost estimates were often not readily comparable or could not be adjusted to a
different context. This resulted from the wide range of methods applied and measures of
output chosen. Most common shortcomings were the omission of certain costs and failure to
adjust financial costs to generate economic costs. Generalise ability was hampered by
authors not reporting quantities and prices of resources separately and not examining the
sensitivity of their results to variations in underlying assumptions.
Conclusion: The observed shortcomings have arisen despite the abundance of literature and
Guidelines on costing of health care interventions. This paper provides ITN specific
recommendations in the hope that these will help to standardize future cost estimates.
Author(s):
Abstract:
Activity-based costing (ABC) is a tool used by managers to more closely approximate the
―true costs‖ of operations. The application of ABC in logistics is more commonplace today
than just a few years ago, though still far short of universal. Sound tracking of operational
costs is critical when pursuing the logistics objective of providing desired customer service
at the lowest total cost. This research illustrates an actual application of ABC to reverse
logistics activities performed across supply chain organizations. More specifically, a case
study of a Michigan beverage distributor and retailer that collect empty beverage containers
for recycling purposes is presented. The case study demonstrates the ABC application in
53
detail and discusses the re-engineering of supply chain-wide processes resulting from the
analysis.
The application of cost-effectiveness analysis to health care has been the subject of previous
reviews. We address the use of economic evaluation methods in public health, including case
studies of population- level policies, e.g., environmental regulations, injury prevention,
tobacco control, folic acid fortification, and blood product safety, and the public health
promotion of clinical preventive services, e.g., newborn screening, cancer screening, and
childhood immunizations. We review the methods used in cost-effectiveness analysis, the
implications for cost-effectiveness findings, and the extent to which economic studies have
influenced policy and program decisions. We discuss reasons for the relatively limited
impact to date of economic evaluation in public health. Finally, we address the vexing
question of how to decide which interventions are cost effective and worthy of funding.
Policy makers have funded certain interventions with rather high cost-effectiveness ratios,
notably nucleic acid testing for blood product safety. Cost-effectiveness estimates are a
decision aid, not a decision rule.
54
An Emperical Analysis Of The Relation Between The Board Of Director
composition And Financial Statement Fraud
Abstract
This study empirically tests the prediction that the inclusion of larger proportions of outside
members on the board of directors significantly reduces the likelihood of financial statement
fraud. Results from logit regression analysis of 75 fraud and 75 no- fraud firms indicate that
no- fraud firms have boards with significantly higher percentages of outside members than
fraud firms; however, the presence of an audit committee does not significantly affect the
likelihood of financial statement fraud. Additio nally, as outside director ownership in the
firm and outside director tenure on the board increase, and as the number of outside
directorships in other firms held by outside director‘s decreases, the likelihood of financial
statement fraud decreases.
Abstract
Purpose
Electronic medical record systems improve the quality of patient care and decrease medical
errors, but their financial effects have not been as well documented. The purpose of this
study was to estimate the net financial benefit or cost of implementing electronic medical
record systems in primary care.
Methods
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We performed a cost-benefit study to analyze the financial effects of electronic medical
record systems in ambulatory primary care settings from the perspective of the health care
organization. Data were obtained from studies at our institution and from the published
literature. The reference strategy for comparisons was the traditional paper-based medical
record. The primary outcome measure was the net financial benefit or cost per primary care
physician for a 5-year period.
Results
The estimated net benefit from using an electronic medical record for a 5-year period was
$86,400 per provider. Benefits accrue primarily from savings in drug expenditures, improved
utilization of radiology tests, better capture of charges, and decreased billing errors. In one-
way sensitivity analyses, the model was most sensitive to the proportion of patients whose
care was capitates; the net benefit varied from a low of $8400 to a high of $140,100. A five-
way sensitivity analysis with the most pessimistic and optimistic assumptions showed results
ranging from a $2300 net cost to a $330,900 net benefit.
Abstract
As recent technology progress makes hydrogen a realistic long-term energy option with little
or no pollution, development of new methods for its production and improvement of
conventional technology is important. In spite of the fact that, among overall world
technologies for hydrogen production today, only 4% is produced by electrolysis, this is the
most promising method in the future as a consequence of the high existing water supply. The
limitation factor for its use on the large scale is well known-high energy consumption.
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In this work, methods for increasing efficiency and lowering the energy consumption in the
electrolytic hydrogen production are presented. The stability of ionic activators, as an
indicator of capital cost, are also shown, as are an analysis of composition, structure and
morphology characteristic of cathode, formed in the presence as ionic activators.
Dr. J.D. Aggarwal, professor of Finance, Founder, Chairman and Director of Indian Institute
of Finance and Chief Editor of Finance India.
Abstract
It is one of the book were we can find maximum for getting deep insight in finance. The
book is written by such a person who requires no introduction in the field of finance. The
provide deep knowledge starting from basic about analysis of financial statement its
objective for assessing the health of an company its advantage and disadvantages.
The book provides knowledge about how to read a balance sheet different format and
requirement by company to prepare according to law requirement.
It also tells about essential tools and techniques requirement for analysis of financial
statement.
Dr. J.D. Aggarwal, professor of Finance, Founder, Chairman and Director of Indian Institute
of Finance and Chief Editor of Finance India.
Abstract:-
Again a deep research done by novel laureates Dr. J. D. Aggarwal which provide knowledge
about the usefulness of Economics in Finance. The book deals with tools and techniques
that a economist can use for assessing the economic condition of any country and the
business group of that country.
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Again the economic theories give by the author is very use full in making decision and
arriving at any conclusion.
Last but not the least the economic theories like utility theory, totalitarian theory and many
more which are very useful in decision making.
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CHAPTER. 3
RESEARCH METHODOLOGY
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Research methodology:-
The system of collecting data for research projects is known as research methodology. The
data may be collected for either theoretical or practical research for example management
research may be strategically conceptualized along with operational planning methods and
change management
.Some important factors in research methodology include validity of research data, Ethics
and the reliability of measures most of your work is finished by the time you finish the
analysis of our data.
Formulating of research questions along with sampling weather probable or non probable is
followed by measurement that includes surveys and scaling. This is followed by research
design, which may be either experimental or quasi-experimental. The last two stages are data
analysis and finally writing the research paper, which is organised carefully into graphs and
tables so that only important relevant data is shown.
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graduate students at every phase of the dissertation and thesis process. We can help you
choose a qualitative approach and analyze your qualitative data through such procedures as
grounded theory, domain analysis, and analytic induction.
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Sources of Data collection:-
There are primarily two of collection of data that are Primary source and secondary source.
Primary research entails the use of immediate data in determining the survival of the market.
The popular ways to collect primary data consist of surveys, interviews and focus groups,
which shows that direct relationship between potential customers and the companies.
Primary data is accumulated by the researcher particularly to meet up the research objective
of the subsisting project.
Two strategies are commonly employed when researchers gather primary data: randomizing
and blinding. Both of these strategies serve to keep the results objective. Both involve
limiting the information given either to the researcher or the subject about which test group
to which a subject has been assigned. The researcher is prevented from imposing her bias on
the data so she may be a more careful observer
Once the primary data has been gathered, analysts study it using other research methods.
They look for relationships between factors that may suggest the designs for new studies.
When they combine the primary data from more than one study, they are using integrative
methods. Their findings present secondary data, a synthesis of several streams of primary
data.
There are many methods of collecting primary data and the main methods include:
questionnaires
interviews
observation
case-studies
diaries
critical incidents
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Portfolios.
The first advantage of primary data is that it can be collected from a number of ways like
interviews telephone surveys, focus groups etc. Secondly, it can be also collected across the
national borders through emails and posts. Thirdly, it can include a large population and
wide geographical coverage. Fourthly, it is relatively cheap and no prior arrangements are
required. Moreover, primary data is current and it can better give a realistic view to the
researcher about the topic under consideration.
The major disadvantage of primary data is that it has design problems like how to design the
surveys. The questions must be simple to design a general lingo (understandable). Some
respondents do not give timely responses. Sometimes, the respondents may give fake,
socially acceptable and sweet answers and try to cover up the realities. In some primary data
collection methods there is no control over the data collection. Incomplete questionnaire
always give a negative impact on research.
Sources of primary data where the employees of Atlas cycle ltd. During my 2 month project,
I continuously keep on rotating myself in different department of the company . During this
period data was collected from AGM finance , DGM sales , DGM cost and various
employees of sales, purchase and account department.
Secondary data is data that is neither collected directly by the user nor specifically for the
user, often under conditions not known to the user. Examples include Government reports.
Secondary information has already been collected for some other purposes. It may be
available from internal sources, or may have been collected and published by another
organization. Secondary data is cheaper and more quickly available than primary data, but
likely to need processing before it is useful.
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Secondary data analysis saves time that would otherwise be spent collecting data, and often
provides a larger and higher-quality database than would be feasible for any individual
researcher to collect. For analysts of social and economic change, secondary data is usually
essential, since it is impossible to conduct a new survey that can adequately capture past
change.
Published report
Government statistics
Scientific and technical Abstracts
Company's financial statements
Banks reports
web sites
journals
Magazines
There are several things to take into consideration when using pre-existing data. Secondary
data does not permit the progression from formulating a research question to designing
methods to answer that question. It is also not feasible for a secondary data analyst to engage
in the habitual process of making observations and developing concepts. These limitations
hinder the ability of the researcher to focus on the original research question. Data quality is
always a concern because its source may not be trusted. Even data from official records may
be bad because the data is only as good as the records themselves. There are six questions
that a secondary analyst should be able to answer about the data they wish to analyze.
1. What were the agency's or researcher's goals when collecting the data?
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4. What methods were used? Who was responsible and are they available for questions?
6. What information is known about the success of that data collection? How consistent is
the data with data from other sources?
Secondary data is the most easily accessible data and saves the researcher the trouble of
going through the tiresome process of collecting data personally.
· Secondary data is readily available at cheap rates and is usually quite inexpensive.
· Secondary data is unobtrusive. It is easily available and the researcher can get it without
much struggle.
· Secondary data avoids data collection problems and it provides a basis for comparison.
Since many surveys deal with national populations, if you are interested in studying a
well-defined minority subgroup you will have a difficult time finding relevant data.
Secondary analysis can be used in irresponsible ways. If variables aren't exactly those
you want, data can be manipulated and transformed in a way that might lessen the
validity of the original research.
Much research, particularly of large samples, can involve large data files and difficult
statistical packages.
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Tools and techniques used in the analysis are:
Analyses of financial statements are the end product of the accounting process. Last but not
the least leg of the accounting process is summarising the accounting data in the form
balance sheet, income statement and change in the financial position which help in analysis
and interpretation of the accounting data.
Financial statement normally includes Balance sheet and profit and loss account and cash
flow statement.
Balance sheet:-
It gives the statement of shareholder equity ( paid-up share capital and reserve and surplus) ,
loans , current liabilities and provisions, investment , loan and advances, and currnet asset.
The format of the balance sheet is prescribed in schedule VI of the companies Act.
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Revenue Expenses
Refers to money earned by an organization for goods sold and services rendered during an
accounting period, including
Represent costs incurred for goods and services used in the process of earning revenue.
Direct expenses for an MFI include
• Financial costs,
An income statement
• Relates to a balance sheet through the transfer of cash donations and net profit (loss) as
well as depreciation and in the relationship between the loan loss provision, and the reserve.
• Uses a portfolio report‘s historical default rates (and the current reserve) to establish the
Loan Loss Provision.
• Relates to a cash flow statement through the net profit/loss as a starting point on the cash
flow (indirect method).
The net profit so arrived at is used for appropriation in various reserve mandates by the law
or decides upon by the Board of Director.
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Cash flow statement:-
It indicates inflows and outflows of cash during an accounting period. A cash flow statement
is required to be published pursuant to clause 32 of the listing agreement and should be
based on and be in agreement with corresponding profit and loss Account and balance sheet
of company.
• Classifies the cash flows into operating, investing and financing activities.
♦ Investing activities: expenditures that have been made for resources intended to generate
future income and cash flows.
♦ financing activities: resources obtained from and resources returned to the owners,
resources obtained through borrowings (short-term or long-term) as well as donor funds.
♦ The direct method, by which major classes of gross cash receipts and gross cash payments
are shown to arrive at net cash flow (recommended by IAS)
♦ The indirect method, works back from net profit or loss, adding or deducting noncash
transactions, deferrals or accruals of past or future operating cash receipts or payments, and
items of income or expense associated with investing or financing cash flows to arrive at net
cash flow.
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Financial analysis forms an important part of business analysis, which is precede by
accounting analysis and followed by prospective analysis. It also involves how analytical
tools and techniques such as Ratio, cash flow measure can be used to evaluate the operation,
financial and investment performance of a business enterprise with a focus effectiveness and
efficiency in the conduct of business affair by the management.
Financial statement;
2. Learning the formats of income statements and balance sheets to easily separate the
Effect of donor funds;
4. Adjusting costs for inflation, subsidized cost of funds, and in-kind donations; and
RATIO ANALYSIS:-
Ratio Analysis uses a combination of financial or operating data from a company or industry
to provide a basis of comparison. Each ratio measures a unique relationship that may impact
others.
It involves the method of calculating and interpreting financial ratio in order to assess the
strengths and weakness underlying the performance of an enterprise. In order to calculate a
ratio a relevant relationship between two numbers of financial statements is established and
the result of the same is interpreted in order to derive meaningful conclusion.
Several of the most commonly used ratios are grouped into categories, including:
Liquidity Ratios measure how easily a firm can meet its obligations.
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Profitability Ratios indicate the earnings potential of a company.
Asset Management Ratios measure how efficiently a company uses its assets.
Debt Management Ratios indicate financial leverage and how well a company can
handle that debt.
Dividend/Market Value Ratios measure earnings for investors.
Liquidity Ratios provide ability to meet short – term obligation as they become due. Liquid
asset are those which can be converted in cash.
Quick Ratio
Curre nt Ratio
Given the current assets and current liabilities from a company's balance sheet:
Generally, the higher the ratio, the stronger the liquidity position of the company and
the more easily it can meet its obligations.
Quick ratio:-
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Generally, the higher the ratio, the stronger the liquidity position of the company and
the more easily it can meet its obligations.
The Basic Earning Power Ratio isolates earnings from uses of leverage
Given Earnings before Interest and Taxes (EBIT) from a company's income
statement and total asset from the balance sheet.
EBIT = Net Income + Interest + Taxes
Basic Earning Powe r = EBIT / (Total Assets)
Generally, the higher the ratio, the more raw earnings potential of the company.
Earnings Per Share (EPS) indicates how much profit the company earns for each
share of common stock outstanding.
Given net income from a company's income statement and the number of shares
outstanding:
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Generally, the higher the ratio, the more potential value for the stock price.
The Gross Profit Ratio indicates how much of each sales dollar is available to pay
expenses.
Given sales and cost of goods sold from a company's income statement:
Generally, the higher the ratio, the more from easily expenses can be covered from
sales.
Profit Margin
The Profit Margin Ratio indicates how profitable a company's sales are.
Given net income and sales from a company's income statement:
Generally, the higher the ratio, the more profit earned from each dollar in sales.
Return on Assets
Generally, the higher the ratio, the greater the profit from corporate assets.
Return on Equity
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The Return on Equity Ratio (ROE) relates profitability to ownership by showing
income as a percentage of equity.
Given net income from a company's income statement and total assets from the
balance sheet:
Generally, the higher the ROE, the more profit is earned for owners of the company.
Days Sales Outstanding (DSO) indicates how well receivables are managed.
Given the sales from a company's income statement and accounts receivable from the
balance sheet:
DSO = (Accounts Receivable) / (Average sales per day)
Generally, the higher the ratio, the more potential for problems in getting paid.
The Fixed Asset Turnover Ratio measures how fixed assets are used to generate
sales.
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Given sales from a company's income statement and net fixed assets from the balance
sheet:
Fixed Asset Turnove r Ratio = Sales / (Net Fixed Assets)
Generally, the higher the ratio, the more sales the company is able to generate from
its fixed assets, and thus the more efficient the firm's production.
Debt Management Ratios or Solvency ratio:- Long tern creditors are more concerned
with the firms long term financial strength . a firm should have a strong short term and long
term financial position.
Debt Ratio
The Debt Ratio indicates how much of the assets are provided through debt.
Given the total debt and total assets from a company's balance sheet:
Debt Ratio = (Total Debt) / (Total Assets)
Generally, the higher the ratio, the greater the liquidity (ability to meet current
obligations using liquid assets).
The Debt to Equity Ratio indicates how much financing is provided through debt as
compared to equity.
Given the total debt and total assets from a company's balance sheet, use the Debt
Ratio:
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Debt Ratio = (Total Debt) / (Total Assets)
Debt to Equity Ratio = (Debt Ratio) / (1 - Debt Ratio)
Generally, the higher the ratio, the more financial leverage is employed by the firm,
and the higher the financial risk.
EBITDA Coverage
The EBITDA Coverage Ratio shows if earnings are able to satisfy all financing
obligations, including leases and principle payments.
Given the EBITDA and lease paid from the Income Statement and the interest and
principle paid from the Statement of Cash Flow:
EBITDA Coverage = (EBITDA + Lease Paid) / (Interest + Principle Paid +
Lease Paid)
Generally, the higher the ratio, the more secure the lender's position. A ratio less than
1.0 indicates an inability to meet financial obligations out of operating cash flow.
The Times Interest Earned Ratio shows the ability to service interest payments from
earnings. This ratio focuses more narrowly than the EBITDA Coverage Ratio which
considers other obligations than interest which must also be paid from earnings.
Given the Earnings Before Interest and Taxes (EBIT) and Interest from the Income
Statement:
The Times Interest Earned Ratio = EBIT / Interest
Generally, the higher the ratio, the more easily interest obligations can be met out of
earnings. A ratio of less than 1.0 means earnings are insufficient to meet the interest
payments.
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Advantage of Ratio Analysis:-
There are various groups of people who are interested in analysis of financial position of a
company. They use the ratio analysis to workout a particular financial characteristic of the
company in which they are interested. Ratio analysis helps the various groups in the
following manner: -
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7. To workout s hort-term financial position: Ratio analysis helps to workout the
short-term financial position of the company with the help of liquidity ratios. In case
short-term financial position is not healthy efforts are made to improve it.
8. Helpful for forecasting purposes: Accounting ratios indicate the trend of the
business. The trend is useful for estimating future. With the help of previous years‘
ratios, estimates for future can be made. In this way these ratios provide the basis for
preparing budgets and also determine future line of action.
In spite of many advantages, there are certain limitations of the ratio analysis techniques and
they should be kept in mind while using them in interpreting financial statements. The
following are the main limitations of accounting ratios:
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making. For example, average collection period may be equal to standard credit
period, but some debtors may be in the list of doubtful debts, which is not disclosed
by ratio analysis.
5. Effect of window-dressing: In order to cover up their bad financial position some
companies resort to window dressing. They may record the acco unting data
according to the convenience to show the financial position of the company in a
better way.
6. Costly Technique : Ratio analysis is a costly technique and can be used by big
business houses. Small business units are not able to afford it.
7. Misleading Results: In the absence of absolute data, the result may be misleading.
For example, the gross profit of two firms is 25%. Whereas the profit earned by one
is just Rs. 5,000 and sales are Rs. 20,000 and profit earned by the other one is Rs.
10,00,000 and sales are Rs. 40,00,000. Even the profitability of the two firms is same
but the magnitude of their business is quite different.
8. Absence of standard university accepted te rminology: There are no standard
ratios, which are universally accepted for comparison purposes. As such, the
significance of ratio analysis technique is reduced.
SWOT ANALYSIS:-
The third tool used for completion of the project is swot analysis. Where we try to analyze
the strength, weakness, opportunity and threat associated with compa ny. The SWOT analysis
provides information that is helpful in matching the firm's resources and capabilities to the
competitive environment in which it operates. As such, it is instrumental in strategy
formulation and selection.
A list of general factors which affect Strengths, Weaknesses, Opportunities and Threats is a
great thinking aid that allows you to better analyze the complete range of variables that
78
affect your enterprise. Pertinent Factors can be categorized as Internal Factors and External
Factors for the purposes of SWOT planning.
These factors are those that affect your Strengths and Weaknesses and are within or a part of
your enterprise. Internal Factors usually imply organizational charac teristics and can include:
What other ways are there of looking at your organization and breaking it up into a series of
related parts and concepts? As you can see, SWOT Analysis brings up the more basic
question of how to define the internal and external factors that shape business. Any
methodology used to define your business and business environment can then provide points
of analysis for a SWOT exercise.
External Factors
These factors within a SWOT Analysis are those that affect Opportunities and Threats and
are external to your organization. External factors usually imply environmental or market
conditions and can include:
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• Macroenvironme nt: social, economic, legal, government, technology, environment
Analyzing Factors
The purpose behind looking at internal and external factors affecting your business is a
thinking exercise. The factors listed above are merely definitions to get your started and are
not endpoints that are graded from 1-10 to establish Strengths, Weaknesses, Opportunities
and Threats. Each should be elaborated on as appropriate for your situation.
What other ways can you find to categorize the various factors that play into your own
SWOT Analysis? Almost any model for analysis internal and external business conditions
can be used to define specific factors that will come into play in a SWOT exercise.
Whichever thinking model you are comfortable with and use should also be applied to
SWOT planning.
There is no end to how you can categorize the various factor s that affect your decisions in
obtaining your objective. Each set of factors is based on a specific perspective of looking at
businesses and so you may find some overlap and interchange when looking at and
analyzing the factors pertaining to your specific enterprise in various ways.
Thinking about factors is a great way to expand your analysis of any one Strength,
Weakness, Opportunity or Threat to ensure that you cover the full range of variables
affecting your planning. For example, if a specific organizational process is deemed ―time
intensive‖ and this is seen as a weakness, then what about other process delays? Similarly,
the same Weakness can be expanded upon to look at the ―people‖ factor within your
organization as a whole.
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Strengths and weaknesses are internal factors that create value or destroy value. They can
include assets, skills, or resources that a company has at its disposal, compared to its
competitors. They can be measured using internal assessments or external benchmarking.
Opportunities and threats are external factors that create value or destroy value. A company
cannot control them. But they emerge from either the competitive dynamics of the
industry/market or from demographic, economic, political, technical, social, legal or cultural
factors (PEST).
The biggest advantages of SWOT analysis are that it is simple and only costs time to do. It
can help generate new ideas as to how a company can use a particular strength to defend
against threats in the market. If a company is aware of the potentia l threats then it can have
responses and plans ready to counteract them when they happen.
There are also disadvantages of SWOT analysis. A typical SWOT analysis is a usually a
simple list and not critically presented. If a company is thinking about compiling lists it may
not be focused sufficiently on how to achieve its objectives. Taking a list approach can also
result in items not being prioritised. For example, a long list of weaknesses may appear to be
'cancelled out' by a longer list of strengths, regardless of how significant those weaknesses
are.
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CHAPTER. 4
ANALYSIS
82
ANALYSIS:-
It is one of the important part of my project report. It contains study of financial statement
like Balance sheet, profit and loss account and cash flow statement. As , I was also concern
with the cost reduction techniques implemented by the company , so my analysis part also
consist of cost sheet analysis.
To find the financial health of company the use of Ratio analysis will be implemented.
Which will help in finding the current position of company in discharging its obligation and
how company take care of its shareholders?
The analysis will consist of data of four year but major comparison will be done between
data of two years that are 2007-08.
Also the study will consist of graphs which will be helpful for every person to understand
the finding and conclusion of my project.
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Balance sheet (Rs crore)
Owner's fund
Loan funds
Uses of funds
Fixed assets
84
Net block 73.27 58.96 33.40 33.40
- - - -
Miscellaneous expenses not written
Notes:
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ANALISYS OF BALANCE SHEET :-
Company have not issued any new share since 2005. It‘s maintaining the same amount of
3.25 crs. And also the company emphasis on maintaining a good amount of reserve and
surplus but in year 2006-07 the amount increased many folds the reason was company has
sold its fixed asset in Bawal which include Land and Building which provided the profit of
Rs. 100.64 crs.
Till date company has not issued any preference share to public.
Coming to Loan Funds we can observe that there was decrease in secured loan in the year
2005-06 comparing to 2004-05 but again in the subsequent year company has availed
secured loan and the trend remain the same in current financial year also.
Similarly in unsecured loan section the trend is opposite of secured loan the company has
raised funds in year 2005-06 but repaid in subsequent year.
Coming to fixed asset the company is continuously expanding its business and acquiring
fixed asset in terms of land and building and other assets also. Despite of sale of Land and
Building in the year 2006-07 company has acquired some fixed asset which can be clearly
observed.
Coming to the calculation of working capital requirement which consist of net of current
asset.
There is an increase in current asset year after year starting from 2004-05 and the trend
remain same in the subsequent year there was a massive increase in current asse t in the year
2006-07 the year also observed the increase in sales.
In the section of current liability the same trend can be observed there was also one reason
for this that was economic boom in this period which also provided boost to cycle industries.
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BALANCE SHEET ANALYSIS FOR THE YEAR 2006-07 AND 2007-08
87
Comparing the balance sheet of two year we can observe that sources of fund for the
company are decreasing that of from the last year that is 2006-07. Issued share capital for the
company is same over the year the decrease is in the Reserve and surplus. Capital reserve is
same as it was in the year 2006-07 but revenue reserve is decreasing and also surplus carried
forward is decreasing. Coming to secured loan Company has raised term loan by the way of
Deposit and Bank loan it was mainly used to acquire assets as in the application of fund the
company has acquired fixed asset which include machine like Air blower replacement of
furnaces and some expenses under construction and installation. Coming to Investment
Company invest her funds under two heads that are Long term investment and Current
investment. In the year 2007-08 company has invested in Central bank of India by the way
of Equity fund and in Current Investment Company had invested in mutual funds of different
company.
Coming to Current assets there is increase in stock and it was due to increase in production
and also in stock increase was mainly in production materials. Despite of increase in sales
volume the company seems to have changed their credit policy due to which there is
reduction in debtors.
In the year 2007-08 company has recovered cash and loans from and also has paid advance
taxes due to which there is increase in Loan and advance. The increase in loan and advances
were utilised to acquire fixed asset and also there is increase in investment which can be
clearly observed. It was the period when economy was on boom and stock market was
soaring like anything company utilised the market to grow its funds and invested heavily.
Now due to all this effects there is overall growth in balance sheet 5.360380222 %
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INCOME STATMENT
Income:
Expenses
Expenses capitalised - - - -
90
Non-recurring items 0.67 100.94 -0.19 -0.40
Preference dividend - - - -
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Analysis of Income State ment:-
Coming to analysis of Profit and loss a/c we can clearly observer that sales for the company
is increasing year by year by some margin but in the year 2007-08 sales of company has
increased by great margin. During the current years cycle has seen a great demand in its
product the reasons are like introduction of innovative and a great variety of product. At the
same time government policies which are favourable for this industry had also helped a lot to
boost the production of cycle. We can also observe that as manufacturing capacity is
increasing the manufacturing cost is decreasing it is due to reduction in fixed cost as
production volume is increasing. To support this view we can also observe that company is
continuously increasing its human resources year by year.
Coming to operating profit which has shown a drastic change in the year 2006-07 which
even gone to negative (-27.48 cr) the reason are. There are three places were Atlas carry on
its production activity. One is in Sahibabad, another in Sonepat and other is Malanpur.
Now two of its firm is currently running under losses that are Sonepat and Malanpur and
only Sahibabad is one that is making profit so due to this company is having negative
operating profit another reason for the same was increase in consumption in materials as well
as increase in direct taxes. And this is the reason why company is having negative profit
after tax.
Coming to profit for appropriation we can observe that in the year when company was
having negative PAT it is showing maximum profit for appropriation the reason is that in
this year company has sold off its Land and Building which was in Bawal and due to which
company is showing 54.87cr of amount for appropriation.
Company also follow a strong policy of paying dividend to its equity holders every year
which can be clearly observed. And at the same time it also pays off its interest obligation.
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Profit and Loss Account For The year 2006-07 and 2007-08
93
Comparing the profit and loss account statement of 2 years of the company we can observe
that there is massive increase in sales which was due to good economic condition and good
government policies. The sales volume for the year 2007-08 increased by around 3 lakhs in
quantity which was excluding bicycle component and steel tubes. Coming to the section of
other income there is decrease in it and it is because of in the year 2006-07 company has sold
its fixed asset which provided her huge abnormal cash inflow.
Coming to expenditure section there is huge increase from the previous year and it is in
material consumption but there is decrease in manufacturing, Personnel and Administrative
expenses it is because of decrease in fixed cost. There is also increase in interest expenses
from the previous year.
Coming to profit after tax there is decrease by 92%. In previous year company has sold its
fixed asset which consist of land and building due to which there was increase in profit after
tax. Company has a provision of extra ordinary items which consist of legal charge.
Due to this there was massive increase in profit for appropriation which can be clearly
observed as there is fall of about 91% in it. There is no change in proposed dividend as we ll
as dividend tax
Company has transferred its profit to general reserve in the previous year which is much
more than this year.
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CASH FLOW STATEMENT FOR THE YEAR 2006-07 & 2007-08
Adjustment for:
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Cash flow from investing
activities
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ANALYSIS OF CASH FLOW STATEMENT:-
We can observer that Net profit before tax has increased by a great margin it was due to that
in this period all three unit of Atlas has incurred profit where last year that is 2006-07 two of
its unit were under loss. Coming to depreciation Part Company follows straight line method
for its two units that are Sahibabad and Malanpur while written down value method for
Sonepat unit.
Coming to adjustment for working capital requirement we know that whenever there is
increase in current asset from the previous year there is increase in requirement of working
capital. In the given year stock is increasing where as debtors are decreasing the reason for
the same is company realization process has become strong. Coming to Loan and Advances
which has increased from previous year and due to which there is increase in current asset
which ultimately increases the working capital requirement.
Coming to current liabilities which is just reverse of current asset means when current
liabilities increase the requirement for working capital decreases where as when it decreases
the requirement increases. So in this creditors are increasing means need of working capital
is reduced. We can also observe that other current liabilities are increasing compared to
previous year which again reduces the need of working capital.
Company has paid more Direct Taxes in the 2007-08 than in 2006-07 it is mainly due to
higher sales and high income it was due to in this period the economy was on boom creating
high demand for cycles.
Coming to cash flow from Investing activities we can observe that company has acquired
fixed asset this year also but less than that of previous year. Company invest huge amount of
money in different types of investment like Mutual funds. Company has invested in 30
different types of mutual funds excluding other investment.
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Now cash flow from financing activities in the period of 2007-08 company has borrowed
loan from different bank which include EXIM and SIDBI. There is no repayment of loan
during this year.
Finally coming to cash and cash equivalent on 31.03.2008 which is reduced by a great
margin from the previous year it was due to that company has sold its fixed asset in the year
2006-07 which provided her lot of cash flow but in the year 2007-08 company has made
huge profit due to increase in sales volume.
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COST STATEMENT ANAYLSIS:
A cost benefit analysis is done to determine how well, or how poorly, a planned action will
turn out. Although a cost benefit analysis can be used for almost anything, it is most
commonly done on financial questions. Since the cost benefit analysis relies on the addition
of positive factors and the subtraction of negative ones to determine a net result, it is also
known as running the numbers.
Should we hire an additional sales person or assign overtime? Is it a good idea to purchase
the new stamping machine? Will we be better off putting our free cash flow into securities
rather than investing in additional capital equipment? Each of these questions can be
answered by doing a proper cost benefit analysis.
1. Ascertain Costs: - Ascertain or collect all the expenses relating to a particular period.
2. Analyze Costs: - Analyze or classify the expenses under different heads of account
such as material, Labour, Expenses etc.
3. Allocate Costs: - Allocate or charge in full the direct expenses or the specific costs
such as Raw Materials, Labour to relevant product, contract or process.
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4. Apportion Costs: - Apportion or distribute common expenses to each product,
contract or process on suitable basis.
5. Absorb Costs: - Absorb the total expenses of a department over its products. So, in
this final step, the individual cost of each product is determined. This product cost is
then reported to management.
The preparation of cost sheet is one of the important and primary function of cost
accounting.
This can be described as the process of accumulating, measuring, analyzing, interpreting and
reporting cost information that is both useful and relevant to the internal and external
stakeholders of a business entity. External stakeholders are those who have a vested financial
interest in a business or company. For example banks (loans), financial houses (mortgages),
investors (investments), etc. Internal stakeholders are the business or company directors,
managers, division heads, etc.
One of the many benefits of cost accounting is that it turns data into information, knowledge
and wisdom about a business entity‘s operations that is useful for:
measuring performance
Another benefit is that information on the costs programs and activities may be used as a
basis to estimate future costs in preparing and reviewing budget requests. Once budgets are
approved and executed, cost information serves as a useful feedback on performance.
Moreover, costs may be compared to known or assumed benefits to identify value-added and
non-value added activities. Reliable information on the cost of programs and activities is
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crucial for the effective management of a business entity‘s operations. Cost accounting is
especially important for fulfilling the objective of assessing operational performance. The
objective is to improve the efficiency and effectiveness of operations by furnishing program
managers and others with timely and relevant cost-based performance information to allow
for continuous improvement in delivering outputs and outcomes to stakeholders. Cost
accounting has been with us since early times to help managers understand the costs of
running a business. Modern cost accounting originated during the industrial revolution, when
the complexities of running a large scale business led to the development of systems for
recording and tracking costs to help business owners and managers make decisions.
In the early industrial age, most of the costs incurred by a business were what modern
accountants call "variable costs" because they varied directly with the amount of production.
Money was spent on labour, raw materials, power to run a factory, etc. in direct proportion to
production. Managers could simply total the variable costs for a product and use this as a
rough guide for decision- making.
Some costs tend to remain the same even during busy periods, unlike variable costs which
rise and fall with volume of work. Over time, the importance of these "fixed costs" has
become more important to managers. Examples of fixed costs include the depreciation of
plant and equipment, and the cost of departments such as maintenance, tooling, production
control, purchasing, quality control, storage and handling, plant supervision and engineering.
In the early twentieth century, these costs were of little importance to most businesses.
However, in the twenty- first century, these costs are often more important than the variable
cost of a product, and allocating them to a broad range of products can lead to bad decision
making.
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management accounting that translates the Supply Chain (the series of events in the
production process that, in concert, result in a product) into financial values.
Prime cost
Work cost
Cost of production
Total cost
Company do standard costing for evaluation purpose and also to measure the deviation.
A standard cost is a planned cost for a unit of product or service rendered. Standard costs
represent excellent target costs that should be obtained. The institute of Cost and
Management Accountants (UK) defines standard cost as ―a predetermined cost, which is
calculated from the management‘s standard of efficient operation and the relevant necessary
expenditure. It may be used as a basis for price fixing and for cost control through varia nce
analysis.‖
The advantages to be derived from a system costing will vary from one business to another.
Much depends upon the degree of sophistication achieved and the acceptance by the
management of utility of the system. Some of the advantages are as follows:-
Effective cost control: The most important advantage of standard costing is that it facilities
the control of costs. Control is exercised by comparing actual performance with standards
and taking action on the basis of variances so revealed.
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Help in planning: Establishing standards is a very useful exercise in business planning with
instills in the managements a habit of thinking in advance.
Provides incentives: The standards provide incentives and motivate to work with greater
effort. Schemes may be formulated to reward those who achieve or surpass the standard.
This increases efficiency and productivity.
Fixing prices and formulating policies: Standard costs are a valuable aid to management in
determining prices and formulating production policies. For instance: - prices may be fixed
by adding a standard margin of profit in standard cost. Similarly, standard costing furnishes
cost estimates while planning production of new products.
Standard costing system suffers from certain disadvantages. This may be because of lack of
education and communication and resultant misunderstanding on the part of managerial
staff. Some of the disadvantages are:-
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A business may not be able to keep standards up-to-date. In other words, a business
may not revise standards to keep pace with the frequent changes in manufacturing
conditions. Firms may avoid revising standards as it is a costly affair.
Inaccurate and unreliable standards cause misleading results and thus may not enjoy
the confidence of the users of the system.
The success of standard costing system depends on the reliability, accuracy and acceptance
of the standards. Extreme care, therefore, must be taken to ensure that all factors have been
considered in the establishment of standards.
Standard costs are set for each element of cost i.e. direct materials, direct labour and
overheads. These are described below:-
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Material price standard
This is a forecast of the average prices of materials during the future period. This standard is
quite difficult to establish because prices are regulated more by the external factors than by
the company management. The purchasing department notifies the standard prices after
considering factors like:-
Note: Provisions should be made for discounts, packing and delivery charges, etc.
While setting quantity standard, the quality and size of material items to be consumed should
be standardized. The standard is usually developed from material specifications prepared by
the department of engineering of product design.
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This is determined having regard to the current rates of pay and any anticipated variations.
Sometimes an agreement between trade unions and employer covers a number of future
months or years. In such cases, the agreed rate should be adopted as the standard rate for the
period.
Note: (Type of operation will determine the grade of labour to be employed may be male or
female, skilled, unskilled or semi-skilled, etc.)
(Where workers are paid on piece basis, the standard cost will be a fixed rate per piece.)
Standard time for labour should be scientifically determined by time and motion studies
carried out in conjunction with a study to determine the most efficient method of working.
Due allowance should be made for normal loss time like fatigue; idle time, tool setting, etc.
Direct expenses are not very common, but if there are any direct expenses relating to the cost
unit, standards for these too must to set. Setting these standards are usually quite simple as
these may be based on past records adjusted according to anticipated changes therein.
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Variance Analysis
The function of standards in cost accounting is to indicate variances between standard cost
and actual cost which have been recorded. The institute of cost and management accounts
defines variance as the difference between a standard cost and the comparable actual cost
incurred during a period. Variance analysis can be defined as the process of computing the
amount of and isolating the cause of variance between actual cost and standard cost.
Variance analysis involves two phases:
The main purpose behind this analysis is to reconcile the cost statement with financial
statement and find out the change in cost of the one of the profitable brand manufactured by
the atlas cycle ltd. On the basis of this analysis we will find out the various cost reduction
technique implemented by the company to reduce it manufacturing cost and increase its
profit. Atlas has a very good research and development department which mainly focuses on
improving the quality and reducing the cost at the same time.
To do the analysis we will compare the cost sheet of most profitable and popular brand
manufacture by Atlas cycle ltd during the two year. The cost sheet for the month of
September 2006-07 and 2007-08.
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COST SHEET FOR THE MONTH OF SEPTEMBER 2006-07
Material
Items Consumable Direct lab Power Total
cost
cost
Frame 169.24 48.82 18.2 7.93 244.19
Fork 99.47 6.83 2.25 1.5 110.05
Mudguard 46.46 20.39 5.1 6.82 78.77
Chain cover 17.48 5.11 1.45 1.25 25.65
Total 333 81.15 27 17.5 458.65
Contribution 184.64
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COST SHEET FOR THE MONTH OF SEPTEMBER 2007-08
Material Direct
Items Consumable Power Total
cost lab
cost
Frame 176.98 67.67 19.2 8.93 272.78
Fork 107.03 8.83 2.25 1.5 119.61
Mudguard 47.53 25.39 5.6 6.82 85.34
Chain cover 19.45 6.11 1.45 1.25 28.26
Total 350.99 108 28.5 18.5 505.99
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Selling Price(Average) 1738.98
Less Rebate and Cash
Dis.(Est.) 101.01
Net selling Price (Avg) 1637.97
Contribution 175.04
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COMPARISION BETWEEN THE TWO YEAR COST SHEETS:
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ANAYSIS OF COST SHEET:
The major portion of bicycle which consists of 32% of total cost is itself manufactured by
company itself. Like Frame, Fork, Mudguard and chain cover. Rest of part Atlas got
manufactured by others to whom the tender has been given. Atlas has provided them there
logo and trademark and the company get manufactured these items according to their
specification.
Comparing the two cost sheet we can observer that contribution margin for the company is
reduced by great margin and at the same time cost for the company has increased.
According to the company personnel earlier they were using 2mm thickness of steel in
manufacturing the cycle but after hard work done by R&D department Company
management came on conclusion to reduce it thickness. It was also a step toward reducing
the cost but due to hike in steel price it doesn’t seems to work for the company. Earlier
company used to do NICKEL plating on both side of RIM used in bicycle. It was the time
when nickel price was somewhere 1470 Rs/kg. Company as step of cost reduction started
to use nickel plating on only one side of RIM and on another they started to use Paint it was
the case of 2006-07. Suddenly Nickel prices dipped and dipped by more than 50% in the
year 2007-08 which was again a set back for the company because this time when company
wanted to revert back toward nickel plating customer protested as they wanted the
painted RIM over the nickel one.
Again coming to costing the year 2006-07 was one of the worst year for the Atlas company
as this year witnessed growth in all sector except in cycle industry. Reason were hike in
steel prices , market condition was not suitable for the industry.
Coming to contribution part which consists for Overhead and profit. Overhead consist of
indirect manufacturing expenses like depreciation, Repairs and maintenance and financial
expenses.
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Company provides rebate to its Dealers depending on some factors like Advance payment,
number of quantity ordered and number of time the order. Some time Company also
provide perks to its dealers like return ticket to some place for touring.
One of the other methods of cost reduction applied is that they change the packing
methods as well some technique of manufacturing of cycle.
Company apart from cost sheet also does standard and actual costing. Where standard
costing is set as standard for the month and after that company do actual costing to find
the degree of deviation.
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RATIO ANALYSIS:-
Ratio analysis is the process of determining and expressing the numerical or quantitative
relationship between two related variables for purposes of financial analysis. Ratio analysis
is the calculation and comparison of ratios, which are derived from the information in a
company's financial statements. The level and historical trends of these ratios can be used to
make inferences about a company's financial condition, its operations and attractiveness as
an investment.
Ratio analysis help us to check whether a business is doing better this year than it was last
year and also tells us if the business is doing better or worse than other businesses doing and
selling the same things.
Ratios should be taken as guides that are useful in evaluating a company‘s financial position
and operations and making comparisons with results in previous years or with other
companies. The primary purpose of ratios is to point out areas needing further investigations
Ratio analysis can be of invaluable aid to management in the discharge of its basic function
of planning, forecasting, coordination, communication and control. It is a device to diagnose
the disease of an enterprise. It is the powerful tool of financial analysis. The advantages of
ratio analysis are summarized as below.
2. A study of the trend of strategic ratios may help the management in the task of
planning and forecasting.
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3. The ratios measure the efficiency of operations of enterprises. Hence they can be
used as a tool of management control.
Now this part will consist of those ratios which have significance related to balance
sheet.
a) Curre nt Ratio:
Current ratio is defined as the ratio of current assets to current liabilities. It shows
the relationship between total current assets and total current liabilities. It is a
measure of firm‘s short-term solvency. It is calculated as follows:
A rule of thumb sometimes applied to the current ratio is that it should be around 2:1.
This figure should be used with caution. If the company has a rapid inventory
turnover and can easily collect its receivables, the current ratio can be lower. If the
ratio drops to near 1, then the enterprise will be in a potentially unstable pos ition. If
the ratio is low, it may mean that the enterprise is undercapitalized, and consideration
will have to be given to providing more capital, either through increased equity or
more long-term debt. Faced with a low current ratio, an enterprise will have to exist
on a day-to-day basis, and thus it may have to adopt uneconomic practices. Its
products may have to be sold at lower prices to receive payment in cash, or it may
lose sales to competitors that can offer better credit terms. In the operating cycle of
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the firm current assets are converted into cash to provide funds for the payment of
current liabilities. So, the higher the current ratio, higher the short term liability. A
firm which has large amount of cash and accounts receivable is more liquid than a
firm with a high amount of inventories in its current assets, though both the firms
may have the same current ratio
Current Asset
Current Liabilities
Debt equity ratios show the relationship between total debts and owned capital. It is the ratio
of amount invested by outsiders to the amount invested by the shareholders. It may be
expressed as follows;
This ratio reflects the relative claims of creditors and shareholders against the assets of the
firm. A high ratio shows a large share of financing by the creditors of the firm. A low ratio
implies a smaller claim of creditors.
The D/E ratio indicates the margin of safety to the creditors. If for instance the D/E ratio is
1:2, it implies that for every rupee of outside liability the firm has 2 Rs. of owners capital or
the stake of creditors is one half of the owners. Conversely, if D/E ratio is 2:1 it implies low
safety margin for the creditors.
If D/E ratio is high, the owners are putting up relatively less money of their own. It is a
danger signal for the creditors, considering what would happen if the project fails or the
management behaves irresponsibly..
A high proportion of debt in the capital structure would lead to inflexibility in the operations
of the firm as creditors would exercise pressure and interfere in management.
Nevertheless, the shareholders stand to gain if the firm performs well with increase in
operating profits. This is because debt carries a fixed rate of return and if the firm is able to
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earn on the borrowed funds a rate higher than the fixed charge on loans, the benefit will go
to shareholders.
Internal Equity
Interest coverage ratio indicates the firm‘s ability to make regular interest payments
out of its current earning. The standard for this ratio is that interest charges should be
covered six to seven times. It is calculated by dividing the operating profit and earnings
before interest and taxes by the fixed interest charges on loans. It may be calculated as
follows:
Interest
d) Return on Investment:
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The ROI is the most important ratio of all. It is the percentage of return on funds
invested in the business by its owners. In short, this ratio tells the owner whether or not all
the effort put into the business has been worthwhile.
Total Assets
The most widely used ratio, it tells how much profit was generated on a per
share basis. It measures the profitability of the company from the equity shareholders
point of view. It helps to determine the market price of equity shares.
No. of shares
It shows how quickly the debtors are converted in to cash. It is also a test of the liquidity of
a firm. A shorter collection period indicates prompt payments of debtors while a longer
period indicates the inefficiency of credit collection.
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It can be calculated as using the following formula.
Credit sale
This ratio measures the efficiency of a firm in managing and utilizing its assets. It is
based on the relationship between sales or cost of sales and assets/investments of a firm. The
ratio may be calculated as follows:
Sales
Fixed assets turnover = -------------------
Fixed assets
Gross Profit Ratio represents the gross margin or profit on net sales, and indicates the
degree to which the selling price may decrease without any loss from operation to the firm.
The gross profit margin is not an exact estimate of the company's pricing strategy but it does
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sales-volume and cost. Without an adequate gross margin, a company will be unable to pay
its operating and other expenses and build for the future. In general, a company's gross profit
margin should be stable. It should not fluctuate much from one period to another, unless the
industry it is in; has been undergoing drastic changes which will affect the costs of goods
A high ratio of gross profit to sales is a sign of good management as it can imply that the
cost of production of the firm is relatively low. It is also indicative of higher sales price
without a corresponding increase in the cost of goods sold. A very high gross profit margins
A relatively low gross profit margin is a definite danger signal, warranting a careful and
detailed analysis of the factors responsible for it. The important contributory factors may be
(1)a high cost of production reflecting acquisition of raw materials and other inputs on
unfavorable terms, inefficient utilization of current as well as fixed assets. (2) A low selling
price resulting from severe competition, inferior quality of product, and lack of demand.
Gross Profit
Net Sales
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b) Net Profit Ratio:
This ratio is the percentage of sales left after subtracting the Cost of Goods sold and
all expenses, except income taxes. It provides a good opportunity to compare your
company's "return on sales" with the performance of other companies in your industry. The
Net Profit Margin Ratio is calculated as follows:
Net Profit
Net Profit Ratio = ------------------- X 100
Net Sales
The inventory turnover can also relate to the average length of time a firm keeps its
inventory on hand. A low turnover ratio may mean that a company with large
stocks on hand may find it difficult to sell its product, and this may be an indicator
that the management is not able to control its inventory effectively. A low turnover
ratio may, however, also mean that large stocks must be held to ensure that
production schedules are met. A low ratio means a sizeable amount of funds are
tied up. A high turnover ratio may mean that the enterprise is able to recover its
inventory investment rapidly and that there is a good demand for its products. On
the one hand, when the ratio is much higher than the industry average, it may mean
that the enterprise is very efficient in managing its inventories. On the other hand, it
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may mean that the enterprise is starved of funds and cannot afford to maintain a
sufficient inventory; as a result, it may be forced to forgo sales opportunities.
a) Running out of stock due to low inventory (high inventory turnover) which may
indicate future shortages.
The Dividend Payout Ratio measures what a company‘s pays out to investors in
the form of dividends. It measures the amount of current net income paid out in
dividends rather than retained by the business. It can be calculated as:
RONW is one of the most important profitability ratios, which assess how much the
capital invested has earned during the period. It is calculates as follows:
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PBIT
Return of Net worth = ---------------------------- X 100
Total Net worth
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RATIOS RELATED TO BALANCE SHEET
124
GRAPHS
1.2
0.8
0.2
0
2004-05 2005-06 2006-07 2007-08
Interpretation: In the company the ratios were 1.03, 1.04, 0.6 and 0.73 in the year 2004-05,
2005-06, 2006-07 and 2007-08. The lower the ratio the better it is. In the year 2006-07 the
ratio was lower. The debt borrowing was there in the other years so lower the ratio is
better. High indebtedness leads to creditor’s pressure and constraints on independent
functioning and energy of management. Hence we can say that the debt capital ratio as
witnessed by the firm has been decreasing which is not-good for the company. For the
cycle industry the optimal ratio is 3:1.
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Current ratio
1.95
1.85
1.75
1.65
Current ratio
1.55
1.45
1.35
1.25
2004-05 2005-06 2006-07 2007-08
Interpretation: By looking the current ratio of last 4 years, we can say that in the year 2004-
05 is 1.8 and in year 2005-06 decreases to 1.65, which is due to increase in current assets is
more less than current liabilities. Current ratio of 2005-06 and in the year 2006-07 remains
same that is 1.65.
As we all know that the Current ratio is the measure of short term solvency of the firm. It
tell us the arability of current assets for each rupee of current liability. The Current Ratio of
Atlas cycle Limited is higher than one that is the firm has more of current assets than claim
against them.
The higher the current ratio, the greater the margin of safety. The current ratio of 1.33:1 is
the optimal current ratio where as the current ratio of Atlas cycle Limited is 1.57 for the last
year so the firm is having sufficient liquid.
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Interest covg ratio
3.75
2.75
1.75
-2.25
-3.25
-4.25
As a general rule of thumb, investors should not own a stock that has an interest coverage
ratio under 1.5. An interest coverage ratio below 1.0 indicates the business is having
difficulties generating the cash necessary to pay its interest obligations.
In the case of Atlas Company we can observe that in the year 2004-05 has highest ratio of
2.37 comparing to other 3 years. In the year 2006-07 company is having negative ratio of -
3.35 which show that company’s health in this period was very bad. But overall company is
having ratio over 1.5 which is comparatively good.
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Return on invest.
28
25.5
23
20.5
18
15.5 Return on invest.
13
10.5
8
5.5
3
0.5
2004-05 2005-06 2006-07 2007-08
Company has overall good ROI we can see that in every year it is above 2. In the year 2006-
07 company’s ROI is 28.87 which was due to high Profit after tax. This was because of
company has sold off its fixed asset in the same year.
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EPS
170.5
160.5
150.5
140.5
130.5
120.5
110.5
100.5
90.5 EPS
80.5
70.5
60.5
50.5
40.5
30.5
20.5
10.5
0.5
2004-05 2005-06 2006-07 2007-08
In the year 2004-05 EPS was 6.97 which decreased to 2.81 in the year 2005-06 and it
increased to 165.02 in the year 2006-07 but again came down to 6.16. The reason for
sudden jump in EPS was the abnormal profit which occurred for the company on the sale of
fixed asset.
The earnings per share of the company has been fluctuating thus we can say that in any
year shareholders ar getting good return but in some year they are receiving low return
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fixed asset turnover ratio
5
4.8
4.6
4.4
4.2 fixed asset turnover ratio
4
3.8
3.6
2004-05 2005-06 2006-07 2007-08
In this case company was having good return in earlier two year that were 2004-05 and
2005-06 but it has decreased in last two year that are 2006-07 and 2007-08.this show
company efficiency has decreased over the period
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RATIOS RELATED TO PROFIT AND LOSS A/C
131
GRAPHS
Interpretation: Gross profit margin indicates the relationship between net sales revenue and
the cost of goods sold. A high gross profit margin indicates that a business can make a
reasonable profit on sales, as long as it keeps overhead costs in control.
In given case we can observe that gross profit has increased in the year 2005-06 comparing
to 2004-05. But in the year 2006-07 company was not having sufficient sales revenue it was
because two of its concern was under loss in this period but in year 2007-08 company again
regain its position.
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Net Profit Ratio
12
10
0
2004-05 2005-06 2006-07 2007-08
Interpretation: The ratios were in 2007-08, 2006-07, 2005-06 and in 2004-05 were .052% ,
0.2% , 10.82% and 0.2% . The profit is showing downward trend on yearly basis. Again in
the year 2006-07 there was abnormal profit which is also known as non recurring items due
to which there is high ratio.
This ratio is the measure of converting each rupee sale into net profit. If net profit margin
would have been inadequate which is happing in this our case then it shows failure of firm to
achieve satisfactory return on share holder‘s fund. We can say that the company has a poor
net profit margin hence is not able to efficiently converting each rupee sale into net profit
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Inventory Turnover Ratio
12
10
0
2004-05 2005-06 2006-07 2007-08
Interpretation: The ratio for the four year are 11.62 , 10.48, 8.86 and 7.59 for the years 2004-
05,2005-06,2006-07and 2007-08.
The inventory turnover ratio shows how rapidly the inventory is turning into receivables
through sales. Generally a high inventories turnover ratio indicates good inventory
management. A low level of inventory turnover implies excessive inventory levels than
warranted by turnover by production and sales activities, or slow moving obsolete inventory.
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Dividend Payout Ratio
35
30
25
20
15 Dividend Payout Ratio
10
5
0
2004-05 2005-06 2006-07 2007-08
Interpretation: The amount of earnings paid out in dividends to shareholders. Investors can
use the payout ratio to determine what companies are doing with their earnings. A very
low payout ratio indicates that a company is primarily focused on retaining its earnings
rather than paying out dividends. The payout ratio also indicates how well earnings support
the dividend payments: the lower the ratio, the more secure the dividend because smaller
dividends are easier to pay out than larger dividends.
In our case company‘s payout policy is little bit fluctuating. As we can observe that in the
year 2004-05 company has paid 27.34% of dividend where as in year 2005-06 it has paid
34.13%. but in the year 2006-07 the dividend margin decreased heavily. But in subsequent
year again company has paid some dividend to its share holders.
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Earning retention ratio
100
80
60
Earning retention ratio
40
20
0
2004-05 2005-06 2006-07 2007-08
Interpretation: The percent of earnings credited to retained earnings. In other words, the
proportion of net income that is not paid out as dividends. Most earnings retained are re-
invested into the company's operations.
In our case company is retaining back a good amount of profit. If we will observe then will
find that in every year company makes heavy investment in acquiring fixed asset and also
do investment.
Company is retention ratio is increasing on yearly basis. If we observe than we will find that
company is almost retaining 70% of profit. The major benefit of it is that for investment
purpose company don‘t have to borrow external debt.
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PAT to SALE
12
10
6 PAT to SALE
4
0
2004-05 2005-06 2006-07 2007-08
Interpretation: It shows the margin of Profit after tax in total sales. It also measures the
efficiency of company in earning good amount of after tax profit from their sales.
In our case company is not having satisfactory ratio. As we can observe that there is
downward trend in the same on year by year basis. Again in the year 2006-07 the growth
level in the ratio is just due to abnormal profit.
So overall it is not a good sign company must focus on increasing its profit after tax margin .
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SWOT ANALYSIS OF ATLAS CYCLE LTD.:
A vital tool to figuring out the strategic side of any business idea is knowing and
understanding the acronym: SWOT. First, after fully planning and figuring out what will go
into your business idea on paper, the next step is to analyze the company‘s SWOT. While
going through this process you‘ll be able to focus on the strengths and realize weaknesses
early so the business plan can be amended. With this well-rounded business plan and a
completely understood approach, you‘ll be able to safely move towards getting the ball
rolling.
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The acronym SWOT stands for Strengths, Weaknesses, Opportunities, and Threats. This
is an analysis of the business plan that covers both internal and external factors. By using
this tool, you‘ll be able to see the pros and cons before even putting any money into a
project.
The Strengths and Weaknesses categories are both internal factors. These are pretty self-
explanatory, but they are the aspects of your business that you would be directly in control
of. Some of these would include the proper management of staff, managing cash flow,
knowing the company‘s capacity of supply and demand, and the overall efficiency of your
operations.
The Opportunities and Threats portion are external factors. These two are influences
outside of your control and are normally external environmental factors. By pointing out
these aspects of the business, you‘ll be able to try and cradle the Opportunities to make the
most of them and, hopefully, avoid the Threats before they occur. A few examples of these
are changes in the economy, new technologies, outsourcing, industry/customer needs, and
weather issues.
All in all, after using the SWOT analysis on your business plan, you‘ll have a much better
understanding before contributing a large start- up financial investment.
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Strength:
For the company like Atlas which is second largest manufacturer of Bicycle in India. It has
seen a tremendous increase in the number of bicycle manufacturers and bicycle exporters in
the recent past. Today, bicycle manufacturing and bicycle spares industry is well accepted
and is also widely recognised for its quality standards in the international market.
Atlas has a very strong motivated work force which is the greatest strength for the
company.
Excellent staff who are well- trained cycling enthusiasts who recognize the need to
ensure complete customer satisfaction.
Weakness:
The nature of the industry which does not have a smooth, constant flow of goods
(specials and closeouts).
Predicting what products will sell is difficult and since closeouts by their nature are
purchased in big lots, a wrong choice could create a glut of inventory.
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Opportunity:
Wheelie Deals' business model addresses the problem that the retail industry faces
decreasing margins.
The ability to spread fixed costs over a larger area as sales increase, increasing profit
margins.
While the bicycle industry is affected to some degree by the circ ular nature of the
economy, bicycle and accessory sales never fall completely flat since there are many
people that ride bikes regardless if it is economic boom or bust.
Threat:
Entry into this market niche from an established distributor, recognizing this is the
area for growth in the industry.
A decrease in the willingness for manufacturers to sell their closeouts to retailers via
wholesalers, instead selling all of their excess directly to the mail order houses.
The major threat facing the bicycle industry is steep increase in the price of basic raw
material like steel.
The market is not absorbing the full impact of price increase resulting in affect the
industry‘s profitability position.
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CHAPTER. FIVE
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FINDING:-
Coming to the final stage of project the findings are pearls that a person learn from its
project. During the project duration of two month it became very clear the corporate
structure and the working environment of a company. The difference between actual balance
sheet and the balance sheet given in a book is totally different and exist in different realm of
Debt - Equity ratio:- In the company the ratios were 1.03, 1.04, 0.6 and 0.73 in the
year 2004-05, 2005-06, 2006-07 and 2007-08. The lower the ratio the better it is. In
the year 2006-07 the ratio was lower. The debt borrowing was there in the other years
so lower the ratio is better. High indebtedness leads to creditor‘s pressure and
company mainly running on its own fund because from 2004 company has not issued
and equity share to raise money which is again a good sign and depict good financial
health of company.
Curre nt ratio:- By looking the current ratio of last 4 years, we can say that in the
year 2004-05 is 1.8 and in year 2005-06 decreases to 1.65, which is due to increase in
current assets is more less than current liabilities. Current ratio of 2005-06 and in the
year 2006-07 remains same that is 1.65. As we all know that the Current ratio is the
measure of short term solvency of the firm. It tells us the arability of current assets
for each rupee of current liability. The Current Ratio of Atlas cycle Limited is higher
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than one that is the firm has more of current assets than claim against them. Having
sufficient working capital to carry on its day to day expenses. Despite of having low
PAT in same year still company is in good condition to finance its working capital.
Inte rest coverage ratio:-The interest coverage ratio is a measurement of the number
of times a company could make its interest payments with its earnings before interest
and taxes; the lower the ratio, the higher the company‘s debt burden. In the case of
Atlas Company we can observe that in the year 2004-05 has highest ratio of 2.37
comparing to other 3 years. In the year 2006-07 company is having negative ratio of -
3.35 which show that company‘s health in this period was very bad. But overall
company is having ratio over 1.5 which is comparatively good. The company has
three branches out of which two are running under loss and the effect is being shown
not have a positive ROI, or if there are other opportunities with a higher ROI, then
the investment should be not be undertaken. Company has overall good ROI we can
seen that in every year it is above 2. In the year 2006-07 company‘s ROI is 28.87
which was due to high Profit after tax. This was because of company has sold off its
fixed asset in the same year. That means in every year company has been able to earn
sufficient earning from its investment this show company is very much competent in
EPS:- In the year 2004-05 EPS was 6.97 which decreased to 2.81 in the year 2005-
06 and it increased to 165.02 in the year 2006-07 but again came down to 6.16. The
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reason for sudden jump in EPS was the abnormal profit which occurred for the
company on the sale of fixed asset. The earnings per share of the company has been
fluctuating thus we can say that in any year shareholders are getting good return but
in some year they are receiving low return this was mainly due to slowdown in
fixed assets. ROA gives an idea as to how efficient management is at using its assets
to generate earnings. In this case company was having good return in earlier two year
that were 2004-05 and 2005-06 but it has decreased in last two year that are 2006-07
and 2007-08.this show company efficiency has decreased over the period.
Gross profit margin:-Gross profit margin indicates the relationship between net
sales revenue and the cost of goods sold. A high gross profit margin indicates that a
business can make a reasonable profit on sales, as long as it keeps overhead costs in
control. In given case we can observe that gross profit has increased in the year 2005-
06 comparing to 2004-05. But in the year 2006-07 company was not having
sufficient sales revenue it was because two of its concern was under loss in this
Net profit ratio:- The ratios were in 2007-08, 2006-07, 2005-06 and in 2004-05
were .052% , 0.2% , 10.82% and 0.2% . The profit is showing downward trend on
yearly basis. Again in the year 2006-07 there was abnormal profit which is also
known as non recurring items due to which there is high ratio. This ratio is the
measure of converting each rupee sale into net profit. If net profit margin would have
been inadequate which is happing in this our case then it shows failure of firm to
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achieve satisfactory return on share holder‘s fund. We can say that the company has a
poor net profit margin hence is not able to efficiently converting each rupee sale into
net profit.
Inventory turnover ratio:- The ratio for the four year are 11.62 , 10.48, 8.86 and
ratio shows how rapidly the inventory is turning into receivables through sales.
low level of inventory turnover implies excessive inventory levels than warranted by
profits and increased costs. The obsolete inventories have to be written off; this
would adversely affect the working capital and the liquidity of the firm. Atlas cycle
has a very good inventory turnover ratio as it show the efficiency of company is very
good. But as per the company personnel high ratio is also not good as it will lead to
shareholders. Investors can use the payout ratio to determine what companies are
doing with their earnings. A very low payout ratio indicates that a company is
primarily focused on retaining its earnings rather than paying out dividends. The
payout ratio also indicates how well earnings support the dividend payments: the
lower the ratio, the more secure the dividend because smaller dividends are easier to
pay out than larger dividends. In our case company‘s payout policy is little bit
fluctuating. As we can observe that in the year 2004-05 company has paid 27.34% of
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dividend where as in year 2005-06 it has paid 34.13%. but in the year 2006-07 the
dividend margin decreased heavily. But in subsequent year again company has paid
other words, the proportion of net income that is not paid out as dividends. Most
earnings retained are re- invested into the company's operations. In our case company
is retaining back a good amount of profit. If we will observe then will find that in
every year company makes heavy investment in acquiring fixed asset and also do
than we will find that company is almost retaining 70% of profit. The major benefit
of it is that for investment purpose company don‘t have to borrow external debt. This
is the greatest source of fund that company utilises for investment purpose.
PAT to Sale:- It shows the margin of Profit after tax in total sales. It also measures
the efficiency of company in earning good amount of after tax profit from their sales.
In our case company is not having satisfactory ratio. As we can observe that there is
downward trend in the same on year by year basis. Again in the year 2006-07 the
growth level in the ratio is just due to abnormal profit. So overall it is not a good sign
Apart from these all there are some more facts and figure that must pointed out and that are:-
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Company is not in very good health due to tough competition from rivals and also
The sister concern are in very bad condition and due to this company has already
Company is not declaring dividends on regular basis which is not a good sign again
Despite of good technology company is not investing good amount in research and
development.
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CONCLUSION:
During the project we observe that what statements are necessary for the analysis and what it
signifies for the company. The statement consists of financial and cost statements like
Balance sheet, profit and loss statement, cash flow statement and cost sheet. Company do
prepare cost sheet on monthly basis to reconcile it with the financial statements so as to keep
The Statements were totally different from what we have studied in book the working
Company has a wide range of product due to which Atlas has competitive edge over some of
its competitors like TI INDIA, AVON and others. Another important and positive factor for
the company is that company do manufacture most of parts in house by them self which
Company have a very strong and innovative R & D and quality control unit which
continuously work to improve the quality and bring new innovative products.
Company is fully automated and computer driven of which company feel proud. Company
Coming to analysis we have observed that company has three units functioning that are one
in MALANPUR, SONEPAT and SAHIBABAD. Out of three two of its unit are running
under losses that are MALANPUR AND SONEPAT due to which SAHIBABAD unit has to
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The major reasons for loss are increase in steel prices, adverse market condition, decrease in
Company due to its reputation and long standing it became easy for it to avail cheap loan
from public by way of fixed deposit. Company ask for fixed deposit from public for the term
of 1 year company give 11% interest and for 2 to 3 years they pay 11.5% interest. One of the
Despite of its two units running under loss the Sahibabad unit is continuously increasing its
production volume and sales volume too. Some of its ratio are very strong and shows good
sign for the company. Like Debt – Equity ratio which shows that company don‘t require
external fund to run its business and company control is very much in company‘s hand.
The various ratio analysis and cash flow statement also shows that the company‘s financial
position is very good and company is moving sound financially these describe a feasible
According to company they have started to focus on urban population as there prospective
customer. The factors that they think will work for them are,
Changing hobby.
But there is also a major threat in this process that is of China. As china is largest
manufacture of cycle and due to this it is one of the major threat for the company.
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SUGESSTION:
Company must work on its marketing effort to improve its sales and share in market.
Company should focus on comparative analysis with its competitors to get a clear
Must focus on profitability ratio which shows the alarming situation for the company.
Company must pay attention on window dressing process which would provide them
There is lack of coordination between cost department and financial department due
Company should adopt new techniques of risk calculation and financial analysis to
of its relevance can help the company in the cause. A reduced operating ratio shows
signs of good management and hence the company should strive to achieve the same.
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An analysis of the Critical success factors for not only the cycle industry, but also
steel, paint, tube and tayer industry should be done. Critical success factors are those
and automating them reduces time and maximizes profits for the company. Almost
all well-known organizations around the world either have a core team for the same
Profit ratios for the company needs to be improved as compared to other industry
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Limitations Of Study
The topic is a voluminous one for which the time allotted was insufficient.
The scope of the study was limited to Atlas cycle ltd. Finance & account division.
Certain factors are treated as highly confidential by the management and hence data
access was limited.
The theoretical aspect which we have learnt in books was totally different that of
original working in the company.
We have started our training in the month of April when company do there audit
work and this is closing month so company personnel where not being able to
provide us enough time.
Financial statements are based on historical costs and do not consider inflation.
Management may hedge or exaggerate its financial figures. Hence certain ratios
will not be accurate indicators.
A ratio does not describe the quality of its components. For example, the current
ratio may be high but inventory may consist of obsolete merchandise.
Ratios are static and do not take into account future trends.
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BIBILIOGRAPHY
154
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Website Addresses
www.atlascycle.co.in
www.myatlascycle.com
www.bseindia.com
www.equitymaster.com
www.firstglobal.in
www.iif.edu
www.nseindia.com
www.sebi.gov.in
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www.nseindia.com
www.myiris.com
www.investopedia.com
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